Genoa, Italy — We see the 2014 coming close with the prices of barrel, iron ore, and ferrous scrap dropping very sharply in Q4. Iron ore has broken the $75 wall for the first time after five years, and crude oil prices are now below 70$ referring to the Opec daily basket price. It is important to understand how much these trends are related to the market demand and how much related to the geopolitical turmoil. It seems that the iron prices are driven by the lower demand, basically in China, but also by the will of BHP, Rio Tinto and Vale to put out of the market more competitors as possible, using the current lower prices. This is in order to cut their production for getting higher prices in the second half of 2015.
Same situation for the crude oil: the lower world demand and the strong US shale gas production are lowering the prices. This trend is influenced also by the will of Saudi Arabia to put out the more expensive US gas productions. Moreover the objective of the US and Saudi Arabia is to put pressure on Russia using the low oil prices.
Regarding the ferrous scrap the drop is the direct consequence of the strong export of long steel products from China at low prices. The Chinese steel is now offered in the main markets where usually the Turkish steel makers placed their sales. It will be interesting to see if in 2015 the market will be driven by the traditional rules or if the geopolitical and competition affairs will keep the prices at the current or lower level.
The very negative October, here in Italy, conditioned also the November steel chain operators’ job. The main scrap consumer, Arvedi, returned to the full production only at the end of the month. Another mill, Stefana, cut its production for about 10 days, due to a heavy maintenance to the main LNG regional pipe. Unchanged the non-production situation at the Lucchini Piombino and at the ThyssenKrupp Terni plant. Always very low stays the production at Ilva Taranto. Because of all the above, the scrap market remained oversupplied and prices weak. The weekly domestic prices moved down about 15€ during the month, with only a small bounce the last week of November. The monthly import contracts from the European suppliers, settled at the beginning of November, have been reduced by 20€. The arrivals at the Italian ports have been abt 15 Kt for scrap, abt 140 Kt for pig iron and abt 65 Kt for HBI. The mills inventories remained fully recovered, also due to the low steel production.
Following the November official average prices reported (€/pmt delivered):
New arising E8:
Demolition scrap E3:
The expectation for the December contracts are conditioned by the end-of-year holidays and the related production breaks. Some Mills will stop the melting during week 50, others week 51 until the week 2/2015. Only Arvedi Cremona will work at full capacity during the month. Prices are expected unchanged, even if some excitements are reported this week, for the haste of the mills to cover their December needs in short time.
It is important to point out that December started with some positive sounds. The sale of the Lucchini Piombino plant to Cevital Group has been settled after a long deal under the Economic Development Ministry direction. Cevital is an Algerian private company who presented a business plan based on 2 M/ton/y steel production, by means of two new EAF’s and a new rolling line. After long fights and strikes the ThyssenKrupp AST owners, the Metalworkers Unions and the Economic Development Ministry reached an agreement to restart the production at the Terni plant, under a new business plan granting the full employment. Now the Italian Government is working to find a fast solution to save the Ilva group by a temporary direct participation of the CDP (Cassa Depositi e Prestiti) – a joint-stock company under public control – for the time needed to complete the environmental clean up and the revamping. After that the company will be offered on the market to the potential buyers.
PIG IRON – H.B.I.
The pig iron arrivals returned to the usual high volumes. Consequently the inventories at ports and mills are always well recovered. The last pig iron offers are quoted around the $390/395 pmt CIF, for January shipment. The HBI arrivals have been mainly from Venezuela, being out of the market the Libyan producer due to some maintenance. Offers for December shipments are reported around Usd 360 pmt CIF Italy.
Source: Alocci Rapprasentanze Industriali