Steel prices close to bottom, rebound expected: Italy’s Marcegaglia

Italian reroller Marcegaglia believes steel prices are close to the bottom and expects a technical rebound triggered by slowly returning demand.

“I think that in few weeks, or after the summer break, prices will go up again by around 8%-10% from today’s level as little-by-little demand comes back … but also because steelmakers need to offset the higher raw materials costs,” Chairman Antonio Marcegaglia told S&P Global Commodity Insights in an interview.

He added that the exchange rate factor was also relevant, with the dollar/euro exchange rate losing 10-12 points, making raw materials more expensive foe European players.

The spread between European hot-rolled coil steel and raw material prices narrowed 23% in June from May, as spreads unraveled from a record high in April on continued weakness in steel prices, according to S&P Global Commodity Insights data.

HRC prices in North Europe rose from Eur665/mt ex-works Ruhr at the beginning of January to a record high of Eur1,460/mt EXW Ruhr March 21, but they have fallen since to be assessed at Eur855/mt EXW Ruhr on July 20.

“The demand for steel products is back after a period of de-stocking, we see this from our end-users,” Marcegaglia said, adding that he expected overall steel consumption in Europe for 2022 to be 3%-5% lower year on year.

However, he added that 2021 was a “very good year,” as well as the first half of 2022, while it remained to be seen how 2022 would end.

2022 steel volumes

The company’s 2022 steel production volume is likely be in line with the overall decrease in demand, with volumes down by 3%-5% compared to 2021, when the company produced 5.8 million mt.

The steel market at the beginning of 2022 had a bullish start with strong restocking amid rising prices. Since mid-April, market sentiment has changed, driving a strong correction, which will presumably finish by Q3, Marcegaglia said.

2022 was marked by a growing climate of uncertainty and reduced confidence on the part of households and businesses, mainly due to the Russian invasion of Ukraine, but also due to high energy costs, Marcegaglia said, adding that Chinese lockdowns and restrictions also had an impact.

These factors, in addition to 2021’s pandemic shutdowns, high logistic costs and safeguards, have made steel markets increasingly regional and more vulnerable to volatility. Companies, in order to cope, have to be flexible and diversify, he added.

— Annalisa Villa