Ferrous scrap prices in Italy under increased pressure

Domestic ferrous scrap prices in Italy could fall in the coming months as support from the country's energy crisis bailout package could be wiped out by a significant decline in steel demand.

In early October, the financial authorities approved the details of a support package for energy-intensive industries. The package allowed Italian steelmakers to resume steel production, which led to an increase in demand for ferrous scrap earlier this month.

But a steady fall in steel prices since mid-September and a shortage of orders for November-December have forced some Italian plants to cut or even shut down production in the last two months of this year.

Argus ex-factory HRC in Italy was €675.50 per ton on 21 October, down €77 per ton from the previous month. The Italian long products market was also characterized by weak demand and falling prices in October, with Argus ex-factory prices in Italy down 110 euros per tonne month-on-month to 840 euros per tonne on 19 October.

Heightened uncertainty about demand for finished steel over the next two months and expectations of lower steel production led some Italian mills to reduce their purchases of ferrous scrap last week, market participants said. These and other plants that did not cut scrap purchases kept rates unchanged last week, but may start cutting prices in November. Argus estimates that the monthly delivery price of new E8 ferrous scrap in Italy in October was 340-350 euros per tonne, up 5 euros per tonne from the month before. Old E3 scrap was up €12.50/t in September at €320-330/t, while E40 scrap was up €15/t to €340-350/t when delivered to the plant in this month.

Price cuts in the Turkish import market, the flagship of maritime transport, also affected prices in Italy. Argus' daily estimate for HMS 1/2 80:20 cfr Turkey was $360/tonne today, down $11/tonne from October 14, when Italian shipyard shipping estimates were last estimated.

In addition, higher availability of scrap metal as a result of lower steel production in Italy's neighbors such as Switzerland could also weigh on sentiment. Italy competes for imported scrap from Germany with neighboring countries.

Some traders suggest that scrap prices in Italy could fall by €50-60/t from current levels in November-December, although some others have been less bearish.

“We are not seeing a drop in demand for scrap from our customers,” the scrap supplier said. “Of course, sales are average or low. But we estimate [November-December] the Italian scrap market [for work] better than at the end of September.”

In January-September, Italy produced about 16.5 million tons of steel, which is 11% less than last year. September production was 1.9 million tonnes, down 19% from the same period last year, according to Italian steel association Federacciai.