Local Italian scrap market stable, price cuts for October becoming more and more likely

Local scrap prices in Italy have remained unchanged this week as has the general market situation: supply is scarce though it is more than enough to cover producers' needs.

According to sources, the balance of the local Italian scrap market is very precarious and may alter in the coming weeks. In fact, some Italian steel mills have already slowed down or stopped production and others plan to do so shortly. “We are proceeding at a slow pace and there is no prospect of an improvement,” an official at one steel mill said, and another contact confirmed this sentiment, stating, “The situation in the finished market has worsened and we cannot compete with foreign prices. We will most likely see a 30-40 percent reduction in production and long stoppages between December and January”. This will lead to a sharp drop in demand for scrap from steel mills and the intention of producers is to lower scrap purchase prices. “There will be further reductions,” another source commented, pointing out that, although there is little scrap supply, yards are still stocked at a good level given the scarcity of production and the long summer shutdowns. “It would take another €30-40/mt fall in Italian prices to be able to work with decent margins,” another source added. According to one market participant, producers will also try to lower import scrap prices from France, Austria and Germany to the same level as Italian prices. This would entail a drop of €20-50/mt, which, according to some, will not be accepted by the sellers. “Germany and Austria have already suffered losses in the last deals. For them, prices have reached the bottom and they certainly have no intention of lowering them further,” one source indicated.

Furthermore, scrap prices find little support internationally given the recent declines in deep sea scrap prices from Europe, which now stand at $357-361/mt CFR Turkey. According to market participants, increases in ex-China prices following the stimulus policies announced by the Chinese government this week also do not seem to be having much impact on the Italian and European markets. “Maybe it will help keep prices stable, but nothing more, as the problems in the European finished market persist,” commented one source.

Prices include delivery and exclude VAT.