Italian steel market fails to reflect football fever

Football fever is currently sweeping Italy following their dramatic European Championship triumph. In contrast, relative calm is being reported in the domestic steel flat products market, this month.

The speed and scale of coil price increases, over the past year, has taken many Italian supply chain participants by surprise. Local mills, buoyed by previous successes, have proposed further list price hikes.

However, MEPS’ Italian research, in July, suggests that the recent rally has ground to a halt. Hot rolled coil buyers have been able to secure material at the June level of €1080/1130 per tonne. Opposition to the latest proposals is growing, for several reasons.

Firstly, availability from traditional import sources is improving. This is despite existing trade regulations and high freight costs, notably those for container shipments. MEPS understands that Asian suppliers are becoming increasingly competitive, from both price and delivery perspectives. Third-country hot rolled coil quotations, at around €1000 per tonne, CIF local port, for September/October delivery, are widespread.

Owing to muted demand in their home markets, Indian and Turkish producers have become more active in the Italian market. Significant quantities of Indian material were available at local ports, at the beginning of July. As a result, the EC safeguarding quota for Indian hot rolled coil, for the third quarter, was exhausted immediately. Turkish producers retain a significant presence within Italy, despite the current antidumping duties. Reports suggest that Egyptian, Vietnamese and Japanese mills are also targeting increased sales into the Italian market.

Secondly, demand is slowing for seasonal reasons. Apart from a robust white goods segment, other steel-using sectors are expected to scale down their activities, from the first week of August. Auto-related demand remains mixed. This is due, in part, to the ongoing semiconductor shortage. Meanwhile, it is believed that many local construction projects have been put on hold, because of the rapid escalation in input costs, including those for steel.

Future price direction

The recent pricing status quo in the Italian hot rolled coil market has prompted many domestic supply chain participants to doubt the sustainability of recent gains. Conversely, some believe it is just a pause, ahead of another mill price push in September. Extended delivery lead times and low stockholder inventory levels could boost the ambitions of domestic steelmakers, in the post-holiday period.

It is widely acknowledged that Italian steel manufacturers have very little material to offer, on a commercial basis, before October. Major producer, Arvedi, is reportedly prioritising supply to strategic customers. Spot volumes are scarce. Continued uncertainty surrounding Acciaierie d’Italia is exacerbating the situation. The company has stated its intention to increase production at its Taranto site. However, this will do little to ease the current supply bottlenecks, in the short term.

The recent extension of EC safeguarding measures and the introduction of export taxes in Russia, and possibly China, may discourage Italian buyers from procuring material from third countries. This is despite the current trend of increased interest in imports.

The Italian steel flat products market appears to be at a crossroads, heading into the August vacation period. The direction prices will take after the holidays is uncertain. Nonetheless, it is likely that they will remain at a historically high level, in the medium term.