Federacciai at SteelOrbis Italy Forum: decarbonization risks becoming deindustrialization
Speaking at the SteelOrbis Italy Forum 2024 being held in Milan on October 8, Antonio Gozzi, president of Federacciai, the Italian federation representing steel companies, began his speech highlighting the critical issues that the Italian and European steel industries are facing, pointing out that, since the steel industry is a cyclical sector, the slowing demand – caused by several factors including geopolitical uncertainties and rising interest rates – has brought about oversupply.
These two issues are also affecting the decarbonization issue in the European steel industry, Gozzi commented. Disagreeing with the earlier statements made by Paolo Sangoi, president of the steel section of Assofermet, Gozzi said, “I think we all have to work for climate change, but the way the green deal is being applied to Europe deserves further analysis. In particular, the measures that have been taken did not consider impact analysis and cost-benefit analysis. In this way, decarbonization risks becoming deindustrialization, and that would be a débacle for Europe.”
This is because the closure of integrated steel mills will lead, according to Gozzi, to the interruption of the production of a particular type of flat steel that is essential to the automotive industry, which cannot be manufactured through EAF technology. This forces the suffering European automotive sector to import this product from outside Europe, mainly from Asia, Japan, China and South Korea, i.e., from competing countries in the automobile sector.
According to Gozzi, there will be no major investments in European steelmaking from a structural point of view in the next five to 10 years, because steelmaking is a long-term looking industry, and for now it is hard to make predictions. A key issue, however, is definitely the scrap industry, because as decarbonization of steel production is a global issue, there is a shift of production from electric furnaces from 25 percent to 43 percent around 2030, which will make scrap even a more strategic and critical material.
More than 60 countries have already taken measures to curb exports, and that is why Federacciai is calling for it to become a critical raw material which needs to be protected.
Another issue is that domestic scrap in Italy is more expensive than imported scrap, and one wonders how these many electric furnaces will be fueled. The way seems to be DRI, but the issue is controversial in Europe, as it requires particularly large investments. The plant investment must be accompanied by an investment in carbon capture technologies, because DRI is not neutral, even if it halves the blast furnace’s carbon footprint. Added to this is the cost of gas, which is the main power source for DRI.
Gozzi said he believes instead that as of today the priority is to concentrate all resources in the recovery of Taranto, so that it can return to being a plant that produces at least 6 to 7 million tons, which is the breakeven point.
The last topic addressed by Gozzi was trade policies. He said he believes that Europe made a mistake in not joining the US proposal for free trade through NAFTA (North American Free Trade Agreement), thus closing off a possible profitable market for exports.
Assofermet at SteelOrbis Italy Forum: collaboration across the supply chain is key to decarbonization
SteelOrbis has come back to Italy after seven years with SteelOrbis Italy Forum 2024, attracting almost 200 participants. The conference held in Milan on October 8 opened with an Italian steel market overview by Assofermet, the Italian association representing Italian distributors of scrap, raw materials and steel products.
“We are living through a particularly challenging historical moment,” declared Cinzia Vezzosi, president of Assofermet. The Green Deal, launched in 2019, has given a strong push to complex plans, setting ambitious goals with tight deadlines. In this ecological transition, recycled steel emerges, according to Vezzosi, as the most environmentally friendly raw material and a key component for the future of the steel industry. Recycled steel offers three fundamental advantages: it is eco-friendly, acts as an “iron carrier,” and is immediately available. Additionally, the spread of electric arc furnaces (EAFs) is a key factor in improving the circularity of steel production.
In this context, Italy holds a prominent position. “84 percent of Italian steel production comes from EAs, compared to 46.5 percent in the EU and 72 percent in the United States,” Vezzosi explained. This places Italy at the forefront in Europe and globally. A further increase in the demand for recycled steel is expected, and Vezzosi emphasized that this material is already available in significant quantities across Europe. “Increasing the demand for recycled steel would provide a great boost to the sector, making the entire supply chain more resilient.”
To fully take advantage of the availability of the material, technological advancements are necessary, both in industrial plants and machinery, which will also reduce quality waste and increase the availability of “old scrap”. However, regarding DRI (direct reduced iron), the president of Assofermet pointed out that it alone will not be able to meet global demand, although it can improve the quality of the final product. “Scrap will be needed to make up for the shortages in charge and iron content,” she affirmed.
The topic of transition and the current challenges were also addressed by Paolo Sangoi, president of Assofermet Acciai. Sangoi highlighted how the global economic landscape is impacted by the Chinese economic crisis, the inaccessibility of the Russian market, and conflicts in the Middle East and Ukraine. These factors act as a “drag” on economic recovery, worsened by rising costs and declining service quality in manufacturing. Major issues include commercial defense policies and the risk of excessive protectionism.
Sangoi emphasized the importance of imports to the Italian economy, but recent discussions on antidumping measures against countries such as Japan, Vietnam, South Korea, India, and Turkey, which are already subject to quotas, could trigger retaliatory actions and further difficulties for international trade.
In this uncertain context, the Italian manufacturing system is under increasing pressure, Sangoi said. The efforts required by the European Union to achieve carbon neutrality are substantial, and, while the Green Deal offers opportunities, it could place significant strain on strategic sectors, like automotive, which are already hit by global crises. The challenges that emerged in 2024 have fueled fears of a possible “collapse” of the Italian industrial system, with the risk that many companies might relocate to countries with less stringent regulations.
Sangoi concluded by expressing hope for an open and constructive dialogue among all associations and stakeholders in the steel supply chain, both nationally and across Europe, to ensure a sustainable energy transition while preserving the sector’s competitiveness.
European HRC market lacks clear direction; ‘wait-and-see’ sentiment prevails
Last week, a leading European steelmaker increased its offer price for November-delivery HRC to €590 ($647) per tonne ex-works or delivered, depending on the region, Fastmarkets reported.
On Monday, however, mills in Germany had not announced new higher offers, Fastmarkets understands.
“We are expecting some German mills to come back in the market with new prices this week,” a trader source based in Germany told Fastmarkets.
Some European producers and buyers are waiting for the Chinese Golden Week holiday (October 1-7) to come to an end before predicting the price developments in the global flat steel market, according to sources.
As a result, trading remained quiet on Monday.
One mill in Northern Europe was heard offering HRC at €550-560 per tonne ex-works, which was €20-25 per tonne higher than its previous offer, a buyer source told Fastmarkets.
According to the buyer, the previous offer levels could also be available for buyers, however.
Sources indicated the workable market level for HRC in Northern Europe at €530-550 per tonne ex-works.
A second buyer source told Fastmarkets that for larger tonnages even lower prices of €520-530 per tonne ex-works could be achieved.
Fastmarkets calculated its daily steel hot-rolled coil index domestic, exw Northern Europe at €538.08 per tonne on Monday, down by €2.75 per tonne from €540.83 per tonne on October 4.
The index was down by €3.59 per tonne week on week and by €42.67 per tonne month on month.
In Southern Europe, Fastmarkets’ daily steel hot-rolled coil index domestic, exw Italy was calculated at €540.00 per tonne on Monday, up by €5.00 per tonne from €535.00 per tonne on October 4.
The Italian index was up by just €1.00 per tonne week on week and down by €40.24 per tonne month on month.
Fastmarkets sources estimated the workable market level for HRC in Italy at €530-550 per tonne ex-works.
Some customers in Italy have indicated that they could accept a price level of €550 per tonne ex-works, but suppliers in Italy were asking for even higher prices, according to a third buyer source.
Regarding imports, trading also remained muted due to the Golden Week holiday in China. Most Asian suppliers have withdrawn their offers and are expected to return with new higher levels later this week.
Extreme protectionism to cause shortage if demand resumes: Assofermet
Potential EU anti-dumping duties on hot rolled coil from Japan, Vietnam, Egypt and India could result in a material shortage on the domestic market, according to a market note by Italian steel trade association Assofermet.
Paolo Sangoi, president of Assofermet’s distribution segment, warns that the competitiveness of Italian buyers and service centres is being impacted by the compromised opportunity to import coils from third countries, Kallanish notes.
Currently, the market is experiencing a period of stagnant consumption and low coil prices, with the distribution sector being the weakest element of the value chain due to low margins and profits.
Nevertheless, Sangoi contends that a material shortage may occur, potentially resembling the events of 2021 and 2022, if demand increases and consumption improves.
In the event of a resumption of consumption and the absence of imports, the shortage that has been observed in the past may resurface, resulting in significant challenges for buyers. Currently, EU steelmakers are reported to be open to negotiation.
The EU’s 15% import cap has already eliminated 1.6 million tonnes from the market for European buyers, Sangoi says.
Japan, Vietnam and Egypt have already been hit by the imposition of the 15% quota cap under the current EU safeguard measure without the need of further AD measures.
“The higher cost that importers will be forced to bear will inevitably be passed on to end customers, producers of components and finished steel products, undermining their already precarious level of competitiveness in international markets,” it says.
The consumption resumption is not anticipated to occur this year; however, the situation may begin to recover in the first quarter of 2025.
The price trend must change direction, as both producers and coil buyers have a genuine need for price increases throughout the entire value chain.
Nevertheless, this is impossible without a commitment to reduce output, according to Sangoi.
The EU initiated an anti-dumping investigation on imports of hot-rolled flat steel from Egypt, India, Japan, and Vietnam, according to the Official Journal of the European Union on 8 August.
The complaint was lodged on 24 June by the European Steel Association Eurofer.
The products under investigation include certain flat-rolled products of iron, non-alloy steel, or other alloy steel, including cut-to-length and narrow strip products, not beyond hot-rolled, clad, plated, or coated (see Kallanish 9 August).
The Chinese economic crisis has further exacerbated the lacklustre demand for service centres.
“Italy’s GDP remains positive; however, Germany’s stagnation is exceedingly concerning. The path of reducing the cost of money, which has been announced, does offer some optimism for the medium term, as it could potentially stimulate demand.”
According to Assofermet, the sales volume contraction in July was less severe than anticipated, with cold-rolled and coated products outperforming hot-rolled products.
However, August was adversely affected by the prolonged production shutdowns, which resulted in a decline in prices and the market was extremely weak in September with no real resumption after the summer break.
Natalia Capra France
UK Steel calls for additional protection from overcapacity
Industry association UK Steel is warning the domestic market could be exposed to excess capacity if existing safeguards were to lapse, Kallanish notes.
The Steel Trade Beyond 2026 report says that excess steel capacity worldwide, built due to non-market forces such as state subsidies, could cancel out UK investments if not tackled with new trade policies. Global steel excess capacity in 2023 was estimated at 543 million tonnes.
Steel demand in China is also weakening, and the country is expected to export 100mt this year, causing supply to spill over into other markets and dampen steel prices.
The average profitability of the steel sector is currently the lowest in a decade, according to the report, with producers in developed economies losing market share to underpriced imports.
The import share in the UK has jumped to 68% so far in 2024, from 60% in 2023 and 55% in 2022, with just 40% of the UK’s yearly demand requirements being fulfilled by domestic supply.
The association notes that while the UK government is investing seriously in building the UK steel industry, addressing excess capacity and fair competition should be a fundamental element of the upcoming Steel Strategy.
UK Steel director general Gareth Stace says: “A raft of distortive subsidies is leading to oversupply which is met with rising protectionism and trade diversion.”
The report adds that safeguards which have been shielding the UK sector from trade diversion, will have to expire in 2026 due to WTO rules, and action must be taken urgently ahead of existing protection lapsing in 21 months’ time.
There are fears that growing trade protectionism by other countries could result in trade flows being directed at markets left exposed, with the UK government now needing to go further than it has before. The US continues to add additional tariffs on Chinese imports, as has Canada.
It recommends the government explores trade policy options, including ones that make use of WTO exceptions, in the context of actions taken by other WTO members which could include tariff-rate quotas.
Additionally, it should seek to play an active role in international initiatives such as the Global Arrangement on Sustainable Steel and Aluminium currently being negotiated between the US and EU.
Other recommendations include reviewing the UK trade remedies framework to make it more accessible to industry, and strengthen carbon leakage and public procurement policies to counter the impact of excess capacity on UK producer market share.
Stace adds that excess capacity has the potential to redraw the map of global steelmaking as there is no longer fair competition.
The report also notes that capacity growth in Southeast Asia and the Middle East has been largely state-funded and for high-emission blast furnaces. Over two thirds of the steelmaking capacity is in countries that have net zero targets later than 2060 or none at all.
Carbon-intensive blast furnaces account for more than 74% of capacity additions in Asia, while 89% of blast furnace energy input globally comes from coal.
“Failing to tackle the issue head-on could see British steelmakers continue to lose market share and mean that investments in decarbonisation are all for naught. So far, steel safeguards have offered a necessary shield but their expiry in 2026 could see industry faced with a cliff edge,” Stace concludes.
Carrie Bone UK
Half of German fabricators need to reduce staff
Germany’s steel and metals fabricators’ federation warns of continued pessimism among companies amid the ongoing climate of slow growth, Kallanish notes.
In a recent poll by the federation on the business sentiment among its members, 41% of respondents said they plan to lay off personnel. This concerns mostly small and medium-sized enterprises (SMEs), many of them family-owned, with a large share of automotive suppliers.
Companies are suffering not only from low demand on the market but also from a high level of bureaucracy, which urgently needs to be cut back, says WSM managing director Christian Vietmeyer. One critical development underlined by WSM is the “unprecedented flexibility” in the call-offs of carmakers.
A similar picture has been drawn by credit insurer Atradius, which states revenues of steel and metal working companies dropped by 10% from January to April. According to Atradius, 32% of companies have introduced short working hours, which is way above the average for processing/manufacturing industries of 13%. Atradius also observes an increase in bankruptcies and fears that 10% of companies could disappear in the next five years.
SMEs are hit harder in times of recession, states Datev, an IT provider organised as a cooperative by and for tax consultants, auditors and lawyers. SMEs are mostly rooted regionally, and cannot easily translocate production sites to other countries. They also rely very much on established personnel that are loyal to the location, Datev notes.
Datev has carried out a study based on business figures submitted by several thousand companies across all sectors, which in future could work as an index for forecasts by economic research institutes. According to the study, revenue across all companies in August was 5% lower than in August 2023. “That’s what it really looks like; it is a view into the engine room,” says Datev chairman Robert Mayr.
Christian Koehl Germany
EUROFER calls for urgent trade actions to address Global Steel Overcapacity
The European Steel Association (EUROFER) is calling on countries involved in the Global Forum on Steel Excess Capacity (GFSEC) to take immediate and decisive trade measures in response to rising global steel overcapacity.
Newly released data from GFSEC indicate that this issue continues to worsen, putting thousands of jobs at risk and distorting the global steel market, especially in Europe.
EUROFER’s Director General, Axel Eggert, emphasized that market forces alone cannot resolve the overcapacity problem. He urged GFSEC countries to adopt a comprehensive strategy that includes unilateral trade actions, particularly targeting nations that have withdrawn from the forum or continue to export excess steel. “The open market approach only benefits countries with unchecked overcapacity. We need actions that cover the full range of steel products and address all affected countries,” said Eggert.
At today’s GFSEC Ministerial Meeting, it was projected that global steel overcapacity could reach 630 million metric tonnes by 2026, five times the EU’s crude steel production in 2023. This surplus threatens economies with open markets, particularly in the EU, and undermines efforts toward decarbonization and innovation, which are critical for the green transition.
Eggert stressed that European steelmakers are heavily investing in decarbonization, but these efforts are at risk due to the flood of underpriced, carbon-intensive steel entering the market. “We need emergency measures to address this issue and find a structural solution to its root causes,” he concluded.