Italian ferrous scrap prices under increased pressure

Domestic ferrous scrap prices in Italy may fall in the coming months as support from the country's energy crisis aid package may be cancelled out by significantly reduced steel demand.

The financial authorities in early October approved the details for a support package for energy intensive industries. The package has allowed Italian steelmakers to resume steel production, which consequently boosted ferrous scrap demand earlier this month.

But a sustained fall in steel prices since mid-September and thin order books for November-December deliveries drove some Italian mills to trim, or even halt, output in the final two months of this year.

The Argus hot-rolled coil (HRC) ex-works Italy assessment was €675.50/t on 21 October, down by €77/t on the month. The Italian long products market in October has been also characterised by slow demand and slipping prices, with the Argus rebar ex-works Italy assessment down by €110/t month on month to €840/t on 19 October.

Increased uncertainty on finished steel demand in the next two months and expectations of lower steel output led some Italian mills to cut ferrous scrap purchases last week, market participants said. These mills, and other mills that did not reduce scrap buying, kept bids unchanged last week, but they may start cutting prices in November. Argus assessed the monthly delivered-to-mill price for E8 new ferrous scrap in Italy at €340–350/t in October, up by €5/t on the month. The assessment for E3 old scrap was €12.50/t higher on September at €320–330/t, while the E40 shred assessment rose by €15/t to €340–350/t delivered-to-mill levels this month.

Lower prices in the Turkish import market, a bellwether for seaborne trades, also weighed on Italian prices. The Argus daily assessment for HMS 1/2 80:20 cfr Turkey was $360/t today, down by $11/t from 14 October, when the Italian delivered-to-mill assessments were last assessed.

In addition, higher scrap availability resulting from lower steel output from Italy's neighbouring countries such as Switzerland may also weigh on sentiment. Italy competes for imported scrap from Germany with its neighbouring countries.

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

"We don't see any fall in scrap demand from our customers," a scrap supplier said. "Of course, sales are moderate-to-slow. But we estimate the [November-December] Italian scrap market [to perform] better than it did in late September."

In January–September, Italy produced around 16.5mn t of steel, 11pc down on the year. Production totalled 1.9mn t in September, down by 19pc on the year, Italian steel association Federacciai said.

By Valery Zavyazkin