Italian distribution sector reports negative outlook

The Italian distribution sector forecasts declining volumes in the second quarter compared to the same period last year.

While flat and long steel producers are trying to increase values, consumption downstream continues to be sluggish, sources in the sector tell Kallanish.

Some distributors reported a volume decline in Q1 of between 4% and 5%. The first quarter was “saved” for most companies by reasonable shipments in January and February. “Since March, the slowdown is tangible. Margins were also acceptable in the first two months of the year but have deteriorated since March. In certain regions of northern Italy, April was not bad in terms of volumes but it was slow in other parts of Italy, particularly the south,” one source comments.

Margins remain under pressure. “It is a disaster for flat products, namely welded tubes and sheets. Prices are not managing to increase and tube discounts remain high … Some re-rollers are trying to reduce discounts but it is a tough fight. The only way to stimulate demand and prices is to cut capacity. The overcapacity is causing a strong pressure on distributors’ margins,” another source says.

While producers of coil and derivatives are trying to push up values, distributors are continuing to ask for discounts. Month-on-month, sheet and tube prices are stable. Tube discounts remain at 38-39 points with re-rollers trying to decrease by at least two points. Hot rolled sheets are hovering at €690-700/t ($743-754) ex-works.

On long products, steelmakers are also talking about price increases but face resistance from distributors. This month, hikes are expected for beams and merchant bar, while producers of wire rod and rebar have communicated increases to customers but have had a tepid response so far.

Merchant bar and beam prices also remain mostly stable at €700-710/t and about €750-770/t delivered respectively. “Since the Tube&Wire in Dusseldorf, we have not really worked in Italy because of the bank holidays. If some demand comes back, it will be from Monday 6 May,” a source states.

A purchasing group says its outlook for volumes and margins in Q2 remains negative. It expects poor consumption and buyers’ fear of committing to persist. “The latest Eurofer report is very close to the reality we are living. Europe is going through a recessive phase which will last the entire year. Price increases only have the effect to slow the slide but will not bear fruit,” it concludes.

Natalia Capra France