Uncertain supply weighs on Italian HRC market as more buyers seek imports

The Italian flat steel market remains tense, with prices well above Eur1000/mt and buyers lamenting over shortages, though demand and supply were reported be more balanced in recent days, sources said.

Italian HRC prices were heard as stable June 1 with the market still in the midst of absorbing the most recent round of hikes announced by market leader ArcelorMittal on May 28. Offers rose again by Eur20/mt to Eur1170/mt for hot-rolled coil across Europe, with some sources suggesting the more subtle increase pointed towards a potential slowdown in further price increases, as well as an eventual sign of market softening.

The gradual decline in Chinese steel prices seems to have hindered the usual bullish sentiment in Europe, with some buyers now taking a wait-and-see approach, and those with low stocks left with little choice but to accept higher offers from mills. “The momentum of price increases is coming to an end,” an Italian service center source said. “I don’t expect additional increases from mills.”

“It is still not easy to find domestic materials although there is the feeling that the market is more balanced also because there is less a run towards restocking now. We buy from all sources, even from China. In term of prices, we pay $980/mt FOB Chinese ports with September shipments so it is similar to the Italian prices,” a major trader said, underscoring that the situation is more about availability than price.

One source, among others, said there was better availability from imports, though depending on specifications there could be long lead times and limitations on certain products. “This shortage will continue for many months and it will keep the market very tight,” said the source, citing an HRC import offer at Eur980 CIF Italy Ports ex-Egypt and from Japan at Eur1125/mt CIF Italy Ports for cold-rolled coil; the service center confirmed a deal at Eur1160/mt CIF Italy Ports ex-China.

“There is better availability from the Far East. In China we’ve seen a decrease of steel futures, the [pricing] perception is not as robust there in the Far East as it is here [in Europe].”

The largest Italian flats producer, the former Ilva now Acciairie Italia, is still working well below its design capacity with two blast furnaces, No. 1 and No. 2, because No. 4 has been temporarily shut for maintenance and should restart in a few weeks. The company is targeting 5 million mt of crude steel production by year-end.

Market sources are still following the legal development of the largest Italian steel producer with concerns after the Italian State Council’s postponed its decision on whether Acciairie Italia could keep producing crude steel. The Lecce regional administrative court said Feb. 13 that ArcelorMittal had to shut all hot-end operations within 60 days at its Taranto plant to curb emissions. ArcelorMittal appealed the decision to the Italian State Council, with a final hearing that was postponed from May 13 to be done by the end of June. Sources said the decision is expected to come any time soon.

In the meantime another Italian court on May 31 ruled to seize the hot end of Acciarie Italia, but this will be only executed if confirmed when the process will move to its third degree level so it will take at least 5 years. The same court sentenced Fabio and Nicola Riva, the former owners of Ilva to 22 and 20 years in jail, respectively, for the “environmental disaster’ caused by the Ilva steelworks in the southern city of Taranto. This legal process is the one that lead the Italian government to take control and then sell the company to ArcelorMittal. In April this year the Italian government, through Invitalia, Italy’s agency for investment promotion and enterprise development, re-entered in the capital of the former Ilva, then ArcelorMittal Italia, and formed a public-private partnership with ArcelorMittal. The company changed its name into Acciaierie Italia.

It is understood now that the Italian government is awaiting a ruling from the Italian State Council to start the next chapter of Italy’s largest steelmaker’s transition to green production.

— Amanda Flint, Annalisa Villa