Steel scrap market report: October in Italy was one of the most negative months

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Stahlschrott (Foto: Marc Weigert)

Genoa, Italy — The steel products export from China during the first nine months of the year has surged to a new record – as direct consequence of the domestic consumption falls. China’s net finished steel exports in September were impressively high: more than 7 million tonnes. It means that Chinese steel makers exported about 12 percent of their monthly crude steel production, 50 percent more than the 2013. All that is well combined with the very competitive prices offered, due to the low iron ore and coking coal prices. But Chinese are also taking advantage of some tax exemptions to sell qualified steel products cheaply, adding a very low percent of boron in the melting, a forgettable operation in terms of production cost.

Hard competition to drive prices down

The worldwide EAF steel makers are suffering the Chinese strong competition in the long products market. They are producing billets and rebars using the still expensive metallic raw materials, even if ferrous scrap prices fell more than 50 US-$ per ton during the last five weeks. Today, for several steel makers, it is more expensive to produce such long products in their country than to import the cheaper Chinese steel. The hard competition will influence the scrap in the short future, driving the prices down. In the latest October Worldsteel Short Range Outlook, the world apparent steel use growth forecast for 2014 and 2015 has been revised downward plus 2 percent for the current year, instead of the expected 3.1 percent, and plus 2 percent for the 2015, instead of the estimated 3.3 percent.

Fire, accidents and troubles

The October in Italy will be remembered by steel chain operators as one of the most negative months since long time. It started with the notice of the long production cease at the Riva Verona steel mill for important maintenances (three or more months), followed on the 10th by a fire inside the Arvedi Cremona steel mill, followed again on the 16th by an accident inside the Nunkisteel San Giorgio Nogaro steel mill, and last but not least another accident to the Arvedi Cremona plant on the 2nd of November, during the restarting of the EAF. All that has to be jointed with the Lucchini Piombino still waiting for a new ownership, the well famous Ilva Taranto troubles and the heavy claim at the ThyssenKrupp Terni plant between the ownership and the labour unions, where strikes are suspending the production since the beginning of October.

An explosive mixture

The scrap deliveries have been heavily influenced by these events, being the scrap demand suddenly decreased of more than 15 kton per day. The other mills have been engulfed by the scrap deliveries and one mill after the other suspended temporarily the reception not only from the domestic dealers but also from the foreign suppliers. All that was an explosive mixture in a generally doldrums market. The weekly domestic prices moved down up to 35 € during the month, while the monthly import contracts, settled at the beginning of October, have been reduced by 15/20 €. The arrivals at the Italian ports during October have been abt 25 Kt for scrap, abt 160 Kt for pig iron and abt 42 Kt for HBI. The mills inventories are now full recovered also due to the always low demand of finished steel products.

Following the October official average prices reported (€/pmt delivered):

New arising E8:
Italy 260
France 270
Germany 270

Shredded E40:
Italy 265
France 270
Germany 270

Demolition scrap E3:
Italy 240
France 245
Germany 245

The  November  contracts  will  be  influenced  by  restart  of  the  Arvedi  Cremona  production  and  by  the international markets trend. Further price reductions are foreseeable.

The most important news of the month about ILVA Taranto is the Judiciary Court authorization to use the 1.2 billion € confiscated to the Riva family to finance the cleaning-up and revamping works. It means that now several lawyers will start a maybe very long battle before the money will be concretely  usable by the Ilva commissioner. The talks with the possible buyers are still in progress.

PIG IRON – H.B.I.

The pig iron arrivals were important also due to a higher Ukrainian availability. The inventories at ports and mills remain always well recovered, also due to the lower consumption.  The last pig iron offers are quoted around $ 400 pmt CIF for December  shipment. The HBI arrivals have been from Russia, Libya and also a small shipment  from Venezuela.  Offers for October shipments  are reported  around US-$ 360/370  pmt CIF Italy.

Source: Alocci Rappresentanze Industriali