EU import quota cap helps maintain Italian HRC prices

Italian hot rolled coil prices appear to be at a crossroads ahead of the traditional August holiday period.

Few month-on-month hot rolled coil price movements were reported in the July edition of MEPS International’s European Steel Review.  

The limited price movements seen in Italy’s coils market are a consequence of a slowdown in buying and selling activity ahead of the August holidays. 

Steel manufacturers throughout Europe raised their price offers in middle of June. Domestic buyers were unwilling to pay more for their material, given the weak trading conditions across the country, however.  

The price rise attempts were enough to prevent further deterioration, though.  

• MEPS International delivers monthly price data and commentary from the Italian steel market in its European Steel Review publication. Contact MEPS for details of the report and how to subscribe. 

Confusion created by safeguard quota cap 

MEPS respondents in Italy report that the initial speculation around, and eventual implementation of, a 15% cap on the EU safeguard measures’ “other countries” import quota caused a great deal of confusion. 

Significant quantities of imported coils were already at Italian ports, or, alternatively, on vessels bound for Europe, ahead of the start of the quarter three quota period.  

Material originating from Japan, Taiwan, Vietnam – traditional exporters of hot rolled coil to Italy – was expected to exceed the new cap within a matter of days, attracting the additional new duties.  

Buyers in Italy were faced with a dilemma; either customs clear the material and pay the extra cost or leave it at the port for the October quota but incur the added expense of port storage charges. 

During July’s research period, the consensus view among MEPS’s Italian research partners was that they would partially clear their intended tonnages, leaving the remainder in storage. Low market demand and the impending summer holiday period were contributory factors in this decision. Congestion at the ports was subsequently reported.  

The updates to the European Commission’s import safeguard measures were implemented to reduce the volume of hot rolled coil imports, into the EU, from certain countries. Consequently, new hot rolled coil price quotations from Japanese, Vietnamese and Taiwanese suppliers were temporarily absent from the market. They are likely to shift their focus to sales of cold rolled coil and hot dipped galvanised coil.   

Sights shift to Turkish imports 

Italian buyers considered imports from Saudi Arabia, Indonesia and Malaysia following the introduction of the 15% cap on the “other countries” hot rolled coil quota. However, many expect Turkish suppliers to be the main beneficiary of the importers’ search for alternative sources of material. No quick fix is anticipated, though, because of technical and logistical problems associated with introducing new suppliers.    

The expected reduction in supply in the near term may encourage European steel manufacturers to target higher prices. MEPS understands that Arvedi and ArcelorMittal were among those asking for a price hike, raising their offers by EUR30 per tonne for September deliveries. 

Mill delivery lead times, for hot rolled coil, are extending as a consequence of production cuts and scheduled summer maintenance.  

Oversupply issues continue 

MEPS respondents say that Arvedi scaled down its operations in the middle of July while other galvanising and pickling lines will also be out of commission. Acciaierie d’Italia also continues to produce significantly below its capabilities.  

The Italian steel trade association Assofermet reports that service centre sales volumes for the first half of 2024 were around 15% down year-on-year. 

Nonetheless, oversupply pressures persist. Significant cuts in production would be required to offset the market’s low demand. 

Sales of downstream hot rolled coil products, such as tubes, sheets and hollow sections, are subdued and project-based activity is being delayed. The high cost of finance continues to stall investments. Any perceived short-term benefit from the recent 0.25% interest rate cut by the European Central Bank will be psychological at best.  

In the post-holiday period, MEPS expects Italian hot rolled coil prices to be supported by producers’ efforts to reduce supply. Nonetheless, any recovery is likely to be modest and short-lived.