Italian distributors fear continued weakening sales activity

Fear is spreading throughout the Italian distribution sector over future market trend in the first quarter, sources tell Kallanish.

From the service centres’ standpoint, sales activity is almost in complete deadlock. Smaller well-stocked service centres are managing to sell small but steady volumes. Apparent demand, however, no longer exists, and the heavily reduced consumption, particularly for coil derivatives, is forecast to continue until the end of the year. The major concern is over a price collapse in January, as mills will not be able to keep the reduced sales activity going for much longer.

The situation is being made worse by lower import prices from the Far East. While demand is down, Italian mills are still producing this month thanks to the government’s financial support designed to reduce the impact of energy costs for energy-intensive sectors. This will allow steel companies to benefit from a 40% tax discount at the end of the year, which will be calculated considering each producer’s real energy consumption. The move is acting as a stimulus for production but, at the same time, is causing excess supply amid the current low consumption levels.

All coil derivatives, such as sheet and welded tube, are under pressure. High stocks are reported. Tube discounts are increasing to 27-28 points. Because of the slow sales volumes, many service centres are adopting aggressive commercial behaviour and competing with mills’ prices. Today’s only driving factor is to decrease stocks and buy back-to-back, sources observe.

Sheet stocks are high throughout the country as the appliances and automotive sectors are not ordering. Like tubes, prices are also declining to €780-810/t ($782-812) ex-works for the lower grade, sources suggest.

Natalia Capra France