Ferrous Scrap, Italy

The recent statement of Lakshmi Mittal, “The steel demand in the developed countries has still a long way to go before its recovery…. and... it will not be before the year 2015 that it will go back on its pre-crisis level,” seems to be clearly in contrast with the feeling of improvement of the U.S. and German economies. As a matter of fact, with Mittal’s statement transpires the danger that prices of raw materials, such as energy and food goods, could go out of control. This will trigger an inflationary spiral, which could increase the speed with which some countries are getting into debt in order to stimulate their economies. Even so, we still have to suffer and we are still exposed to serious risks in the coming months. The events in North Africa are only making this situation worse.

Generally speaking, the scrap markets have been predictably calm during the second half of January, after a short but strong flash, as buyers have taken a defensive position trying to resist the further growth of prices.

Also here in Italy, where scrap prices reached the highest level for a short time, they fell after 14 January, with a decrease of about €20 on the weekly domestic market. The January contracts from the EU suppliers have been settled by the domestic mills with about a €50 increase. The mills’ inventories are now better than before, thanks to heavy deliveries from scrap yards. Now demand and consumption seem to be well balanced. The arrivals by vessel have been about 25,000 tonnes of scrap, about 92,000 tonnes of pig iron and about 6,000 tonnes of HBI. Only about 6,000 tonnes of scrap has been exported to Turkey by vessels.

In January, the average prices reported per metric tonne delivered for new arising E8 was €380 in Italy and €390 in Germany. Shredded E40 was €380 in Italy and €385 in Germany. Demolition scrap E3 was €330 in Italy and €350 in Germany.

Prices in February seem to still be weak, but also heavily conditioned by the North Africa news and high-grade scrap shortages.

January has been the third month of important arrivals of pig iron or HBI to the ports and consequently both mills and trader inventories remain well recovered. Also in these markets, buyers assume a “wait and see” position, hoping for lower prices. Offers are now reported around $540 per tonne CIF (cost, insurance and freight) for March shipment. There have been very few HBI arrivals.

Higher steel products prices, not supported by significant growth in production or sales volumes, are not enough to say we have started a new positive trend.

Ruggero Alocci can be contacted at mail@alocci.com.