Italian HRC prices decline on import competition

Italian hot rolled coil producers were quick to dismiss the recent fall in domestic pricing as an inevitable consequence of the seasonal reduction in market activity. However, the continued slide in basis values, this month, may indicate that this is part of a more pronounced trend.

The MEPS HRC basis price assessment, for Italy, in September was €1010/1050 per tonne, ex-works. This represents a month-on-month reduction of 2.9 percent, and follows a 3.7 percent decline in the previous four weeks.

High import penetration and a softening in purchasing activity are contributory factors to the recent price contraction.

The accumulation of significant quantities of non-EU material, at Italian ports, ahead of the opening of the fourth quarter safeguarding quotas, will do little to quell the negative sentiment.

It is reported that imports from India, Russia and Turkey are being offered into the country, at €900/950 per tonne, CIF local port.

Most EU buyers predict that the Indian HRC quota, in the fourth trimester, will be exhausted almost immediately, as was the case in the previous quarter. Despite recent export tax regulations, offers from Russian mills are widely available.

Moreover, Turkish suppliers will look to sell surplus stock into the region, due to a subdued trading environment at home. The current antidumping duty, on Turkish HRC, appears to be having a minimal effect on the inflow of material.

Italian HRC producers were initially confident of staving off the threat of significant price deterioration, owing to extended delivery lead times. However, they are finally starting to offer discounts to local buyers.

Weakening trading conditions, in the post-holiday period, are undermining the mills’ pricing ambitions. Activity levels were slow to pick up, in September. End-user consumption is fragile, in many steel-using sectors.

Steel demand from the automotive sector continues to be negatively affected by the global shortage of semiconductors. Many domestic carmakers have cut their production, as a result. Italian white goods suppliers are also scaling down their activities, for the same reason.

Construction-related demand is, currently, being supported by the release of new funding from the European Union. However, a reduction in activity is widely anticipated, in the latter part of this year, for seasonal reasons.

Italian service centres are expected to keep their stock purchases to a minimum, as they anticipate further price falls in the coming months. This is despite existing low inventory levels.

Nevertheless, Italian mills do have grounds for optimism. Domestic hot rolled coil availability is limited, until the end of the year. Major HRC producer, Arvedi, is tabling new offers for late November/early December delivery. Taranto-based mill, Acciaierie d’Italia, has reportedly minimal quantities to offer on the spot market. Production delays, at several large steel manufacturers, have tightened supply, further.

The southern European flat product market continues to be more exposed to declining global prices than those in the north of the continent. Amid an expected influx of third country volumes, at the beginning of October, Italian HRC producers face a struggle to maintain their selling values. Despite tight local supply, it appears increasingly likely that domestic basis prices will soon fall below the €1000 per tonne threshold.