The EU steel safeguard, the former Ilva plant in Taranto, and the verticalization of production are some of the hot issues facing the Italian steel industry. SteelOrbis discussed these topics with Riccardo Benso and Tommaso Sandrini, respectively president of the Italian association of distributors of steel and ferrous and non-ferrous metals Assofermet and president of Assofermet’s steel section.
The Assofermet officials said they completely disagree with the views of the European Steel Association (EUROFER) and the Italian steel producers’ association Federacciai regarding the EU safeguard on steel imports, which producers would like to be extended beyond the deadline of June 30, 2021. “We hope that it will reach its termination,” Mr. Sandrini stated, adding that “it is difficult to implement it” and that “a market protection system such as a safeguard, being limited to a specific link in the supply chain, can only have a temporary validity.” Otherwise, he continued, “a series of effects is created on the downstream market, which suffers a negative impact in terms of material supply.” Added to this is the risk of reactions from trade partners who, as EU Trade Commissioner Vladis Dombrovskis warned a few days ago, could answer with strong retaliation. The producers argue that, in the absence of the current measures, there would be trade distortions that would turn out to be worse than any retaliations, but Sandrini, representing distributors, stated, “Talking about the risk of market distortions due to import flows at a time when European producers are struggling to satisfy orders is quite contradictory.” Furthermore, according to Sandrini, “defining the system of antidumping duties as ineffective is a false representation. Apart from the unique case of antidumping against Russian hot rolled coils (which affects only the Russian steelmaker Severstal), all duties have resulted in a zeroing of flows from the countries or companies involved.” The same zeroing is now desired by steel producers for hot rolled coils coming from Turkey, a country that in recent years passed from being a net importer to being a net exporter, albeit for limited volumes, and therefore is seen by EU steel producers as an enemy to be opposed. However, “we rarely talk about trade balances,” commented Assofermet president Riccardo Benso, noting that “for flat products this balance is well below five percent of cast steel in the EU-28. Therefore, the share which is considered as a disturbance is almost negligible.” He went to say, “In value, exports balance imports, which is normal. We import commodities and export products with high value added.” Those who are impacted by commercial measures are end-users, i.e., those who use steel to produce manufactured goods and “need to be able to compete in the best way in the global market,” Benso added.
Another issue that worries steel distributors is the verticalization strategy implemented in recent years by some steel producers. “It is not correct that those who benefit from a protection system for what is their core business can freely expand into the next ring of the supply chain, with prices that can even reach the limit of predatory,” said Sandrini. According to the president of Assofermet’s steel section, “We have to be consistent. If the market is left free, then it is acceptable for a supplier to expand downstream.” On the contrary, “it is not right that those who benefit from a dominant position do so.” Distributors believe that this is one of the issues that needs to be brought to the attention of the EU, since “the European Commission must find a balance in this regard.” Benso also emphasized that too often institutional forces such as IndustriAll Europe (the European trade union of industry) “do not have the data or are conditioned by only one part of the supply chain, i.e., producers, and therefore play a game exclusively in favor of EUROFER.” However, they forget that at a European level “the end-user sector has more than 3 million employees, against the 330,000 in the steel sector,” underlined Benso.
Speaking of jobs at risk, one cannot fail to address the Ilva plant issue in Italy, which obviously the distribution sector is also following with attention and concern. The president of Assofermet said he is “not very confident” about the final outcome of the negotiations underway between the government and ArcelorMittal, the company that is running the plant. “Some time ago, I viewed negatively the entry of the Italian state into this situation, while today I think it is the only option to optimize the situation,” he added. For both Benso and Sandrini, however, there is too much discussion about who will be in control of the Taranto-based plant and too little about what needs to be done to relaunch it. To date, the Assofermet leaders recalled, the site produces less than 4 million mt of steel per year and is experiencing growing difficulties in fulfilling and respecting orders.
Finally, Benso and Sandrini commented on the market trend this year. After the dramatic and complex phase of the lockdown months, an overall positive period started in June, with very good order levels in the entire distribution sector. In the summer months, explained the president of Assofermet’s steel section, “everyone recorded positive performances, even higher than in the same months last year.” This was due not only to the need to restock, but also “because there was a need to work, to process, to recover the orders that had been left behind.” This was also accompanied by a “positive situation regarding compliance with payments,” Sandrini said. Coming to today, Sandrini continued, “We live in a situation where, in the face of strong stimuli in the Asian market, and with China becoming a net importer of steel, prices have risen significantly, returning to levels that are satisfactory for steelmakers.” Recently there has been a good recovery in consumption, but some concern remains for the evolution of the Covid-19 emergency. Sandrini reiterated that there are serious difficulties in supplying the market due to the closure of import sources. According to Benso and Sandrini, the problem in the coming months “will be less about prices, and more about not being able to obtain steel products in the time and in the way necessary to satisfy the requests of end-users.” The possibility that some European plants may be restarted in the short term is not much comfort, since, Sandrini argued, “if there is no import, there will always be a shortage situation in the domestic market.”
Benso agreed that in the near future the key element, especially for the automotive sector, will be the availability of material: “Today, it is very complicated to procure auto material. There are few and very narrow channels, and little possibility of operating in a market where in the past we as distributors operated with satisfaction and where end-users were also very satisfied. It is important to allow those who produce high-tech products with steel to buy as they prefer, within the limits of “fair trade”, in order to adjust their industrial costs according to the global competition to which they are subjected.” Hence, once again, Assofermet’s appeal to abandon the idea of imposing barriers on imports to defend against supposed enemies from the outside. “The risk is that Europe manifests difficulties in quickly adapting supply to consumption,” concluded Assofermet’s president.