Cinzia Vezzosi (Assofermet): the quality and cost of scrap will be crucial
The element that has now marked 2024, i.e. the lack of demand, is also the one that is worrying the distribution the most.
And if a recovery in the third quarter is now unlikely, the possibility of a more positive development in the medium term is possible.
Cinzia Vezzosi, president of Assofermet, explains this in a siderweb interview. She clarified on recycled steel and scrap: quality and costs will be decisive.
Assofermet: Italian service centres report negative first half
Italian service centres’ sales volumes for the first half of 2024 were about 15% lower compared to the first half of 2023, Italian steel trade association Assofermet says in its market note monitored by Kallanish.
The negative trend can be attributed to persistently unsustainable prices and low margins. June saw an overall decline in demand, a situation that has been ongoing for an extended period of time.
Some end users are expressing interest in negotiating supply for the fourth quarter of 2024 and the first quarter of 2025. Their goal is to secure the current low level of quotes for these periods.
“Maximum attention is now being paid to the consequences of the amended version of the [EU] safeguard … This change is set to dramatically impact the flows of this raw material [hot rolled coil] … Our concern focuses … on the lack of availability of the raw material and the consequent difficulty in maintaining stocks at an adequate level to meet the demand from end users. This adds to the inevitable price increase that EU producers will charge, due to the reduced import capacity,” Assofermet warns.
Production shutdowns at EU steel mills in August will be extensive. This is likely to strongly penalise the downstream segment. Despite the ongoing crisis in consumption, service centres will have to accept significant price increases for steel in order to maintain production and fulfil orders. “This may result in a loss of competitiveness in international markets,” the note states.
The distribution segment is facing a tired market and low visibility. Volumes for flat products are reported to be stable, while those for beams, which typically experience a surge during this season, are currently on the upswing. Finished product demand is stagnant in general but steel prices have remained relatively stable over the past few weeks.
July is expected to be a challenging month in terms of demand and price levels due to the extended closures announced by several steel mills leading to a potential shortage of certain products, Assofermet concludes.
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Assofermet Steel Market Note – May 2024
Carbon Flat Steel Service Centers
April was subdued in terms of volumes sold, even though there was greater buying interest from a number of specific buyers.
Although the period was characterized by a slowdown in business due to many holidays in Italy and central European countries, some positive signs came from those very end users who, driven by the rebound in coil purchase quotations, decided to cautiously cover their sheet and strip needs for the coming months.
Service centers were caught in the stranglehold between producers and consumers, in a market characterized by uncertainty. They have continued to operate under declared insufficient operating margins.
The recent increases in purchase quotations, confirmed by both EU and non-EU mills, added to the import limits imposed by the Safeguard Measure, erga omnes duties and the effects of the CBAM, are pushing distribution and pre-processing operators to change pace by following and reinforcing the upward path of their sales quotations, already undertaken in this first decade of May.
Raw material stocks, available at service centers, appear to be slightly above average due to the slowdown in sales estimated at about 10 percent in the first quarter.
The overall situation may not be a problem today since, as mentioned, quotations appear to be on the rise.
Even tough the conflicts in Ukraine and the Middle East are bound to still impact world economies, some signs of optimism are coming from the EU for the long-awaited and announced round of lowering the cost of money, which is expected to finally begin in June.
Stainless Flat Steel Service Centers
April saw improving demand accompanied by low supply caused by strikes at two major European producers in Finland and Spain and limited imports. The strike at the Spanish producer is still ongoing and has now lasted for more than three months.
The month of May opened with lower demand and new demands for increases from producers.
The EU commission, after a nine-month long investigation, has also just published the anti-circumvention regulation regarding cold-rolled imports from Taiwan, Turkey and Vietnam, confirming the exemption of major producers in these countries.
The decision is welcomed and will make the market better balanced, guaranteeing room for imports by producers while blocking duty-evading operations.
Steel Warehouses
In April weakness remains in the downstream market, that does not seem to want to restart on last year’s volumes. Prices, for which the reversal point was supposed to have been reached, also show no signs of recovery.
Both the flats and the longs, while without any collapse or exceptional movement, left a few cents on the ground throughout April.
The much heralded rebound, however, seems to have taken shape in the first days of May, with volumes in line with 2023 and with noteworthy increases on the price side, both in the flat world and, finally, in the long world.
Whether the premises, will solidify into a real recovery will depend, as usual, on numerous endogenous and exogenous factors.
The ECB seems ready to cut the official discount rate next month, but rumors no longer speak of a downward ride, as was feared at the end of last year, and it is likely that the May rebounds are already the result of the announcement of the June reduction.
Of course, the unfolding of the war in Ukraine, the outcome of which seems increasingly uncertain as time goes on, is certainly not helping markets to enter a phase of stability that would do so much good for the macroeconomic situation.
Flat Tinplate Steel Service Centers
Discreet turmoil on demand for ready material, both due to elongations in lead-times of European ironworks reported up to 14 weeks (as opposed to the usual 7-8), and a price increase of several tens of euros, indicating the expected reaching of the bottom. On the import side, a recovery in quotations is also denoted, supported by the further increase in logistics costs.
May 2024 Steel Market Note – Assofermet
CBAM complications, safeguard hinder steel activity: Assofermet
The normative framework of the EU Carbon Border Adjustment Mechanism (CBAM) and safeguards on steel imports is hindering the daily activity of Italian and European steel companies, says Italian steel trade association Assofermet.
The challenges in filling CBAM reports, the economic repercussions expected from the mechanism starting in 2026, as well the safeguard measures in force from 2018 are a deep concern for Assofermet’s many members.
The European Commission (EC)’s Directorate General for Trade and the Directorate General for Taxation and Customs Union asked the association to highlight the critical issues of the mechanism to help with drafting the final version. “It has been assured that our perspective will be taken into account, especially for the future evolution of CBAM … Agreeing that CBAM will also generate increased costs for downstream end-users in the steel supply chain, it was pointed out to the Commission that if certain finished products … are not included in the mechanism, the European industry will lose competitiveness, given its global role,” Assofermet warns in a note sent to Kallanish.
The association notes an open-minded attitude from Italian authorities to listen to the problems of the entire steel supply chain stemming from regulations and willingness to continue dialogue on the regulatory framework. While the first quarterly report deadline for CBAM has passed, the safeguard on steel imports is currently set to expire at the end of June 2024. “There are no official updates yet on a possible extension after the first half of this year,” Assofermet concludes.
31 January was the deadline for importers to submit their first report detailing emissions as part of CBAM. The European Commission nevertheless announced this week that due to a technical incident, it is offering the possibility to request for a 30-day delay for submission (see Kallanish passim).
During the ongoing transitional phase of CBAM, European importers of steel need to file quarterly reports in the European Commission system, starting from those for the fourth quarter of 2023. During the transitional period, importers are required to report on the quantity of imported goods and resulting direct and indirect emissions. No payments will be due. The transitional phase is planned to conclude at the end of 2025.
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Acciaierie d’Italia low output impacts EU steel availability: Assofermet
The prolonged ownership crisis at Acciaierie d’Italia (ADI) and its lower output may lead to a structural shortage of flat steel products, not only in Italy but also at a European level, Italian steel trade association Assofermet warns.
“The quality products available thanks to Taranto production are very often not available within the EU perimeter. Buyers are therefore forced to turn mainly to Asian steel mills, facing import restrictions which increase costs … The crisis at ADI is part of an already very complicated context for the steel sector,” Assofermet says in a document sent to Kallanish.
EU safeguard measures result in a decrease in the quantity of steel imported into the EU. The Carbon Border Adjustment Mechanism (CBAM) will meanwhile introduce a tax on goods coming from territories outside the EU from 2026. The result will be an inevitable increase in the cost of steel products available in the EU.
“The national [Italian] manufacturing sector’s growth needs a primary steel industry, upstream of the supply chain, that can support it with the necessary quantity of steel,” comments president of Assofermet’s flat steel division Paolo Sangoi.
ADI’s production crisis is happening at a time of low steel availability in Italy and Europe. “Steel output is decreasing: the production levels of 2012, the year of the seizure of the hot-end area of the Taranto plant, have not been reached over the past ten years … With declining steel production and the rising cost of steel, it is essential to preserve the industrial value of the plant,” Assofermet concludes.
ADI, the joint venture between state company Invitalia and ArcelorMittal, registered steel output below 3 million tonnes in 2023, according to preliminary data. This is below the shareholders’ initial objective of 4mt in 2023 and 5mt target in 2024.
ArcelorMittal says it is open to an amicable solution to the conflict with authorities, and prepared to give up its stake to partner Invitalia for a price that “is only a fraction” of the company’s investment into ADI since 2018. While Invitalia refused ArcelorMittal’s recent offer, the steelmaking group assures it is still on the table (see Kallanish passim).
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CBAM unclear, hits downstream sector hardest: Assofermet
The definitive application of the Carbon Border Adjustment Mechanism (CBAM) could lead to an increase in steel import prices of around 15%, Italian trade association Assofermet warns.
“CBAM introduces a sort of new ‘environmental customs duty’ to discourage steel imports … We welcome a collective commitment to promote a sustainable economy and reduce the environmental impact of our industry but we believe that greater attention should be paid to the economic consequences of the CBAM regulations which, if not radically revised, risk undermining the competitiveness of an important part of the EU manufacturing sector,” Assofermet steel division president Paolo Sangoi says in a note sent to Kallanish.
“The cost of steel coming from non-EU territories could increase by up to 15%. This would have important repercussions on the entire Italian and European economy,” he continues, adding that the mechanism is extremely complex and its procedures remain unclear.
The CBAM mechanism currently applies only to some steel products, which impacts end-users and downstream companies, exposing them to unfair competition with importers of competing finished products who would face no restrictions or taxation, Sangoi observes.
The transitional CBAM period will expire on 31 December 2025. Until that time, buyers will have to fulfil only a part of the mechanism’s regulations. Assofermet hopes that before the start of the definitive period, on 1 January 2026, the EU will be able to modify the approach of the measure “to reconcile the just and necessary environmental transition with the inevitable economic consequences that will arise from the implementations of the EU Green Deal and Fit For 55”, Sangoi concludes.
According to European Commission data, in 2022 over 31 million tonnes of steel were imported into member states, Kallanish notes.
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