Italian steelmaker Acciaierie d'Italia's (ADI) slab tolling fees of €160–170/t are proving unmanageable for some buyers, rendering conversion economics unviable compared with prevailing domestic hot-rolled coil (HRC) spot prices.
ADI has pivoted toward offering toll rolling services at its Taranto facility following court orders to halt upstream hot-end operations. The Italian Supreme Court recently upheld a Milan Court of Appeal ruling ordering the suspension of hot-end production in Taranto over environmental infractions. With its own crude steel and slab-making capabilities restricted, the plant has been forced to look to rely on imported slab, pushing the company to market available rolling capacity to third parties in the second half of this year.
However, market participants reported that ADI's quoted conversion fees of €160–170/t would not make commercial sense in the current pricing environment for all but the largest of buyers who can benefit from purchasing larger quantities of slab and perhaps a more preferential tolling agreement.
One trader saw tolling contract prices at €190/t, a price which includes the delivery of the finished product at Ravenna port. It may make economical sense but it depends what you do with the material, the same source said, pointing out that any tolling material produced would have to see further transformation downstream to ensure some type of sales margin. One buyer noted that slab would need to be purchased with the intention of producing specific coils and would therefore be most suitable for commodity grades only.
Heavy plate production lines were not in discussions for tolling, according to sources close to the matter.
Some market participants calculate that with imported Chinese slab offered at around $590/t cfr, and at least a budgeted CBAM obligations of €30/t, the landed slab cost would be approximately €555/t. Adding ADI's tolling fee of around €160/t alongside an estimated 3pc yield loss incurred during rolling, lifts the base cost well above €700/t. Inland logistics, as well as CBAM deposit financing for next year, further erode margins. Freight from Taranto in southern Italy to northern Italian manufacturing hubs or key ports such as Ravenna and Marghera adds additional costs, resulting in an effective delivered cost close to current spot prices. Yesterday's daily Argus Italian domestic HRC index stood at €748.50/t ex-works, leaving little margin for buyers who must shoulder feedstock procurement and financing risks.
Market participants pointed out that the negligible gap between effective ADI-rolled coil costs and prevailing market prices offers no discount or risk premium to justify booking capacity at Taranto. Given the company's operational and legal uncertainties, buyers argue that the spread is far too narrow to offset the threat to the operations. In addition, rolling from externally procured slab is energy intensive, while ADI has high fixed costs associated with employee levels, meaning the tolling model will unlikely be a workable long-term solution that can ease supply pressures on the EU market.
