Federacciai at SteelOrbis Italy Forum: decarbonization risks becoming deindustrialization
Speaking at the SteelOrbis Italy Forum 2024 being held in Milan on October 8, Antonio Gozzi, president of Federacciai, the Italian federation representing steel companies, began his speech highlighting the critical issues that the Italian and European steel industries are facing, pointing out that, since the steel industry is a cyclical sector, the slowing demand – caused by several factors including geopolitical uncertainties and rising interest rates – has brought about oversupply.
These two issues are also affecting the decarbonization issue in the European steel industry, Gozzi commented. Disagreeing with the earlier statements made by Paolo Sangoi, president of the steel section of Assofermet, Gozzi said, “I think we all have to work for climate change, but the way the green deal is being applied to Europe deserves further analysis. In particular, the measures that have been taken did not consider impact analysis and cost-benefit analysis. In this way, decarbonization risks becoming deindustrialization, and that would be a débacle for Europe.”
This is because the closure of integrated steel mills will lead, according to Gozzi, to the interruption of the production of a particular type of flat steel that is essential to the automotive industry, which cannot be manufactured through EAF technology. This forces the suffering European automotive sector to import this product from outside Europe, mainly from Asia, Japan, China and South Korea, i.e., from competing countries in the automobile sector.
According to Gozzi, there will be no major investments in European steelmaking from a structural point of view in the next five to 10 years, because steelmaking is a long-term looking industry, and for now it is hard to make predictions. A key issue, however, is definitely the scrap industry, because as decarbonization of steel production is a global issue, there is a shift of production from electric furnaces from 25 percent to 43 percent around 2030, which will make scrap even a more strategic and critical material.
More than 60 countries have already taken measures to curb exports, and that is why Federacciai is calling for it to become a critical raw material which needs to be protected.
Another issue is that domestic scrap in Italy is more expensive than imported scrap, and one wonders how these many electric furnaces will be fueled. The way seems to be DRI, but the issue is controversial in Europe, as it requires particularly large investments. The plant investment must be accompanied by an investment in carbon capture technologies, because DRI is not neutral, even if it halves the blast furnace’s carbon footprint. Added to this is the cost of gas, which is the main power source for DRI.
Gozzi said he believes instead that as of today the priority is to concentrate all resources in the recovery of Taranto, so that it can return to being a plant that produces at least 6 to 7 million tons, which is the breakeven point.
The last topic addressed by Gozzi was trade policies. He said he believes that Europe made a mistake in not joining the US proposal for free trade through NAFTA (North American Free Trade Agreement), thus closing off a possible profitable market for exports.
Assofermet at SteelOrbis Italy Forum: collaboration across the supply chain is key to decarbonization
SteelOrbis has come back to Italy after seven years with SteelOrbis Italy Forum 2024, attracting almost 200 participants. The conference held in Milan on October 8 opened with an Italian steel market overview by Assofermet, the Italian association representing Italian distributors of scrap, raw materials and steel products.
“We are living through a particularly challenging historical moment,” declared Cinzia Vezzosi, president of Assofermet. The Green Deal, launched in 2019, has given a strong push to complex plans, setting ambitious goals with tight deadlines. In this ecological transition, recycled steel emerges, according to Vezzosi, as the most environmentally friendly raw material and a key component for the future of the steel industry. Recycled steel offers three fundamental advantages: it is eco-friendly, acts as an “iron carrier,” and is immediately available. Additionally, the spread of electric arc furnaces (EAFs) is a key factor in improving the circularity of steel production.
In this context, Italy holds a prominent position. “84 percent of Italian steel production comes from EAs, compared to 46.5 percent in the EU and 72 percent in the United States,” Vezzosi explained. This places Italy at the forefront in Europe and globally. A further increase in the demand for recycled steel is expected, and Vezzosi emphasized that this material is already available in significant quantities across Europe. “Increasing the demand for recycled steel would provide a great boost to the sector, making the entire supply chain more resilient.”
To fully take advantage of the availability of the material, technological advancements are necessary, both in industrial plants and machinery, which will also reduce quality waste and increase the availability of “old scrap”. However, regarding DRI (direct reduced iron), the president of Assofermet pointed out that it alone will not be able to meet global demand, although it can improve the quality of the final product. “Scrap will be needed to make up for the shortages in charge and iron content,” she affirmed.
The topic of transition and the current challenges were also addressed by Paolo Sangoi, president of Assofermet Acciai. Sangoi highlighted how the global economic landscape is impacted by the Chinese economic crisis, the inaccessibility of the Russian market, and conflicts in the Middle East and Ukraine. These factors act as a “drag” on economic recovery, worsened by rising costs and declining service quality in manufacturing. Major issues include commercial defense policies and the risk of excessive protectionism.
Sangoi emphasized the importance of imports to the Italian economy, but recent discussions on antidumping measures against countries such as Japan, Vietnam, South Korea, India, and Turkey, which are already subject to quotas, could trigger retaliatory actions and further difficulties for international trade.
In this uncertain context, the Italian manufacturing system is under increasing pressure, Sangoi said. The efforts required by the European Union to achieve carbon neutrality are substantial, and, while the Green Deal offers opportunities, it could place significant strain on strategic sectors, like automotive, which are already hit by global crises. The challenges that emerged in 2024 have fueled fears of a possible “collapse” of the Italian industrial system, with the risk that many companies might relocate to countries with less stringent regulations.
Sangoi concluded by expressing hope for an open and constructive dialogue among all associations and stakeholders in the steel supply chain, both nationally and across Europe, to ensure a sustainable energy transition while preserving the sector’s competitiveness.
Extreme protectionism to cause shortage if demand resumes: Assofermet
Potential EU anti-dumping duties on hot rolled coil from Japan, Vietnam, Egypt and India could result in a material shortage on the domestic market, according to a market note by Italian steel trade association Assofermet.
Paolo Sangoi, president of Assofermet’s distribution segment, warns that the competitiveness of Italian buyers and service centres is being impacted by the compromised opportunity to import coils from third countries, Kallanish notes.
Currently, the market is experiencing a period of stagnant consumption and low coil prices, with the distribution sector being the weakest element of the value chain due to low margins and profits.
Nevertheless, Sangoi contends that a material shortage may occur, potentially resembling the events of 2021 and 2022, if demand increases and consumption improves.
In the event of a resumption of consumption and the absence of imports, the shortage that has been observed in the past may resurface, resulting in significant challenges for buyers. Currently, EU steelmakers are reported to be open to negotiation.
The EU’s 15% import cap has already eliminated 1.6 million tonnes from the market for European buyers, Sangoi says.
Japan, Vietnam and Egypt have already been hit by the imposition of the 15% quota cap under the current EU safeguard measure without the need of further AD measures.
“The higher cost that importers will be forced to bear will inevitably be passed on to end customers, producers of components and finished steel products, undermining their already precarious level of competitiveness in international markets,” it says.
The consumption resumption is not anticipated to occur this year; however, the situation may begin to recover in the first quarter of 2025.
The price trend must change direction, as both producers and coil buyers have a genuine need for price increases throughout the entire value chain.
Nevertheless, this is impossible without a commitment to reduce output, according to Sangoi.
The EU initiated an anti-dumping investigation on imports of hot-rolled flat steel from Egypt, India, Japan, and Vietnam, according to the Official Journal of the European Union on 8 August.
The complaint was lodged on 24 June by the European Steel Association Eurofer.
The products under investigation include certain flat-rolled products of iron, non-alloy steel, or other alloy steel, including cut-to-length and narrow strip products, not beyond hot-rolled, clad, plated, or coated (see Kallanish 9 August).
The Chinese economic crisis has further exacerbated the lacklustre demand for service centres.
“Italy’s GDP remains positive; however, Germany’s stagnation is exceedingly concerning. The path of reducing the cost of money, which has been announced, does offer some optimism for the medium term, as it could potentially stimulate demand.”
According to Assofermet, the sales volume contraction in July was less severe than anticipated, with cold-rolled and coated products outperforming hot-rolled products.
However, August was adversely affected by the prolonged production shutdowns, which resulted in a decline in prices and the market was extremely weak in September with no real resumption after the summer break.
Natalia Capra France