Italian coil service centre sources report stable consumption on-quarter in the second quarter, with signs appearing of a rebound following declining demand in the previous 12-18 months. There are however concerns over buyers’ ability to source material amid import restrictions.
One prominent company source has observed an increase in orders over the past three weeks from large purchasing groups, which are forecasting improved performance in Q2 and Q3.
Service centres’ Q1 sales volumes largely mirrored those of last year, which was already characterised by weakness, indicating that market tension and uncertainty persist. The primary concern remains weak margins, which are not sustainable in the long term.
“Given the disparity between sales prices and procurement costs, no operator in the market can effectively cover its expenses without resorting to speculative strategies based on purchases made in the past. Our business lacks a balanced structure in terms of its margins,” the source tells Kallanish.
Several members of the Assofermet distribution network told Kallanish at the Made in Steel event earlier this month they have seen their procurement costs soar over recent years and paid very high duties for imported material. Their limited ability to diversify their coil purchases across third countries and European markets put significant pressure on service centres’ margins.
“It is impossible to block imports. The EU may redirect them and change the geography on trade. In the present phase, EU producers will benefit, but in the medium term imports will come back reshaped,” a second source notes.
Distributors have only partly passed on the coil price increases. In 2025, the sector “will have to fight to repay their costs … Volumes are not helping us and we will have to play with our purchasing and selling timing, taking risks. End-users are giving some moderately positive signs, but these have to be confirmed over the next months,” the source adds.
A third service centre highlights the challenges confronting the manufacturing sector as it prepares for the upcoming implementation of the Carbon Border Adjustment Mechanism (CBAM), a complex tool currently under revision in Europe. There is a notable supply scarcity of specific dimensions and quality grades in Europe for the automotive sector.
“I am in the process of ordering a particular galvanised grade for the car sector and am working on issuing a quote to a key customer. The product is currently experiencing a shortage in Europe, with China being the sole supplier. However, the uncertainty surrounding CBAM raises concerns about potential additional costs. At this point, I am estimating the extra costs based on the available information, but I am anxious about the possibility of miscalculating these costs,” the service centre owner says.
The rise in protectionist measures and the CBAM uncertainty are factors that will have strong downstream implications. Due to elevated costs, service centres are concerned about future loss of customers, while certain component manufacturers within the automotive sector may ultimately resort to offshoring. “The number of errors and poor choices made in Europe on protectionism and green steel is unmatched anywhere else in the world,” the source concludes.
Natalia Capra France
