ArcelorMittal Italia has stopped accepting orders for December and January sales and has also stopped making quotations for steel coils sales, following Monday’s announcement that it will pull out of its lease and purchase agreement of the former Ilva works, market sources told S&P Global Platts Tuesday.
Unions told Platts that the company has organized a meeting this evening to discuss when the blast furnaces at Ilva’s major Taranto works are to be idled. AM Italia has 3 BFs running with a targeted annual production of 4.5 million mt crude steel by the end of 2019.
ArcelorMittal said Monday that it would hand back control of the former Ilva to the Italian authorities, following the removal of a legal protection designed to shield the company from prosecution while it undertakes planned environmental remedies at the Taranto site.
According to market sources, it is not possible at the moment to close deals with Italian mills as other local mills have also suspended quotations, meaning that prices could move up.
“Some market players are already concerned about material availability as the ILVA exit comes on top of already announced production reductions of main EU strip mill producers. In the meantime, traders are facing a rise in inquiries,” Eurometal, the European association of stockists, stated in a press note.
“There is also anticipation that mills and traders might use upcoming supply uncertainties to push for higher price levels. For steel distribution and SSC (steel service center) executives these supply disruptions will definitively have implications and consequences for their day-to-day business,” the association stressed. Other market sources have confirmed that large transactions are still stable but that now, for the first time for several months, there are bids at above Eur400/mt for hot rolled coil (HRC).
According to Platts’ south EU daily assessment, HRC South closed at Eur396/mt base ex-works on Monday, with sources saying that some large deals were closed at Eur390/mt base ex-works.
“There was sentiment for a rebound in prices at the end of Q1 or beginning of Q2 following the mills’ productions cuts as well as due to re-stocking, but now following AM Italian news this could accelerate the price increases,” a source from a large Italian stockist said.
“But then because it’s not so clear what will happen in the long run this situation can also push back prices down again. If for example, AM will in the end find an agreement with the Italian government keeping the control of the Italian mill this in the long run this could also lead to a decrease in the prices as the company could put prices down in order to regain market share,” he added.
The Italian government will meet AM Italia representatives Wednesday, government sources said. Any potential closure of the works could put at stake some 15,000 jobs and an estimated 1.4% of Italian GDP, measuring the impact on the entire supply chain. AM did not immediately respond to Platts’ requests for comments on the situation Tuesday afternoon.
