Genoa, Italy — After the June meetings in Brussels, it seems that the European Steel Industry has finally entered the process of restructuring. The main problems are the environmental issues (basically the further reductions of CO2 emissions), the overcapacity (which affects the whole steel chain), the competition with other materials (less weight, better mechanical performances and lower prices) and profitability (today the raw materials are more expensive than ten years ago, around 65 percent of total production costs instead of about 30 percent). The first, third and fourth of these issues are certainly affecting also the scrap recyclers.
The European Commission, pressed by the Steelmakers lobbies, is working towards finding some resolutions to help this restructuring process. Some of these resolutions could take a longer time to achieve the environmental target, an economic stimulus to develop new steel grades and cheaper production processes, and some protections in the raw material trading to cut costs. The scrap recyclers, who have to defend their business and margins, are today in a difficult situation. After some years of very positive profitability (five/seven years from 2002), several recyclers have invested a lot of their earnings in new capacities. Also several new actors started this business trusting in an always long positive trend.
The recyclers also will take part
Today, due to the long economic recession, we are facing a higher recycling capacity on one side and on the other side a scrap generation which is around 30 percent less. All this means more competition, higher processing costs and lower margins. The final effects are underlined by the 2013 negative result (confirmed during the first half of this year) of several scrap recyclers, not only in Europe. It is necessary that the recyclers also will take part to all the deals at European level, as their job is an essential segment of the steel chain. Finally it must not be forgotten that the Chinese are exporting more and more steel products at very competitive prices, also in Europe.
As regards the June Italian scrap market, the prices fell up to 10€ during the first days, due to the strong steel mills aiming to reduce their industrial cost to balance the weak sales prices. During the last days of the month some small increases were reported, as the recycler will now try to increase their sale prices for the July deliveries, before the forecasted very long summer stoppages. The monthly contracts with the other European suppliers have been settled with price reductions up to 5€. Deliveries from trucks and wagons have been regular according to the contracts, but lower than the usual summer volumes, due to the lower scrap generation.
Arrivals a little bit lower
The arrivals at the Italian ports have been: abt 36 Kt for scrap, abt 107 Kt for pig iron and abt 64 Kt for HBI. Mills inventories are now a little bit lower that the beginning of June. The weak steel product sales and prices suggest some EAF mills might start the summer holidays during the last week of July, to anticipate the needed general maintenance, hoping to start in September with a better demand and higher production volumes.
Following the June official average prices reported (€/pmt delivered):
New arising E8:
Demolition scrap E3:
July contracts will be conditioned by the lower Turkish mills activity due to the Ramadan, by the low scrap arising in Europe and by the Mill will to start the holidays with better scrap inventories.
The Government nominated a new Public Commissioner for Ilva Taranto. He has been first given the task to work with the banking system for new credit lines to pay salaries and suppliers. The second step will be the revision of the business plan, balancing the environmental targets with the production capacity and the appropriate industrial cost as the other competitors. People from ArcelorMittal have been in Taranto for about the past ten days: Will Mr. Mittal be the new Ilva shareholder, or will the Riva Family get back the Ilva property? This is the question.
PIG IRON – H.B.I.
Lower the reported pig iron arrivals, even if until now they do not seem conditioned by the turmoil in Ukraine. The inventories at ports and mills are always well recovered, thanks to the previous months strong arrival. The last pig iron offers are quoted around $400/405 pmt CIF for July/August shipment. The HBI received has been delivered from Libya and Russia. Last offers are reported around $365 pmt CIF Italy.
Source: Alocci Rappresentanze Industriali