Italian steel service centers (SSC) remain under pressure, with the first five months of 2018 seeing very little demand, particularly from end-users, according to sources.
2018’s shipment volumes are lower than 2017’s, sources say. In addition, margins are being squeezed. Mill prices have fallen consistently, by about Eur20-Eur25/mt, over the last two months, but SSCs have had to cut their prices by even more – around Eur40-Eur50/mt, a source at a large Italian service center said.
“Obviously this bigger SSC price reduction is penalizing the SSC margin, which is not sustainable any more, and needs to rise urgently, even if the demand isn’t helping and some uncertainty is still present in the market” he added.
Even with slow demand and shipments, SSC stock levels have decreased over the last three months and, as a consequence, SSCs are little by little entering the market, sources say, with the main purchases expected in the coming weeks.
Margins fell because SSCs are having to sell at least Eur30-35/mt below where they make any money, while mills have started to decrease their prices to entice buyers, but also due to pressure from imports.
“Domestic prices have moved down as end-users continue to resist any price rises from distributors, with SSCs not fully absorbing mill price increases in the first quarter,” another source said.
The price of hot-dip galvanized sheet from Italian mills fell the most, around Eur10/mt week on week, to Eur620/mt base substrate, ex-works, according to Platts-TSI data, as a result of an excess in supply.
Cold-rolled coil prices fell Eur5/mt to Eur615/mt base ex-works, according to Platts data, on pressure from Turkish imports, with some seen at Eur620/mt CIF Italian ports, based on a Eur/$ exchange rate of 1.18, traders said.
Domestic Italian hot-rolled coil prices were reported to be around Eur520-Eur530/mt base ex-works, down from Eur550-Eur560/mt four weeks ago. HRC prices dropped, but by a smaller amount than HDG as there is less supply. Buyers last week bid at Eur520/mt ex-works and some mills have dropped below even that mark.
Annalisa Villa, PLATTS
