On the occasion of the autumn conference titled 'Markets at risk and companies' potential' of Assofermet, the Italian association representing companies active in the steel, scrap and non-ferrous metals sectors, SteelOrbis interviewed the association's president Cinzia Vezzosi about the main factors currently putting pressure on the Italian and European metals supply chain: from the risk of deindustrialization to new trade measures, from shrinking margins to the regionalization of supply chains, as well as the future of European scrap exports.
During the conference, Vezzosi identified the ability to react quickly as one of the key strengths of Italian SMEs, which are capable of adapting to change “in months, not years”. However, as emerged from the interview, companies' ability to adapt may no longer be sufficient in an environment characterized by rising costs, increasingly stringent regulations and persistently weak demand.
In February, during EUROMETAL's Southern Europe Meeting, you spoke of a “systemic” risk of deindustrialization and of the need to put competitiveness back at the heart of European policies. Several months later, do you see any signs of a reversal in this trend?
Unfortunately, no. In fact, I would say that the process of deindustrialization and relocation has now reached an even more advanced stage. The introduction of what we call, perhaps somewhat improperly, the “new safeguard measure”, with quotas being halved and the out-of-quota duty doubled, has further constrained companies' ability to operate competitively.
This is making it increasingly difficult for companies to remain competitive in the domestic market and, consequently, in international markets as well. I therefore see no sign of a reversal in the trend; if anything, the situation is continuing to deteriorate.
Italian companies have shown a remarkable ability to adapt in recent years. However, with tariffs, geopolitical tensions, logistics, energy costs and new EU requirements, have we reached the point where this ability is no longer sufficient without structural measures to improve competitiveness?
Absolutely. Companies have essentially already done everything within their power. What is missing today is a broad-based strategy capable of genuinely restoring the competitiveness of the manufacturing sector and, above all, providing a sufficiently stable and predictable framework on which companies can base their planning and investment decisions.
Companies will certainly continue to respond and adapt, but there is one factor we can no longer ignore: margins have fallen to levels that are now materially limiting companies' ability to invest. The willingness to invest may still be there, but, if the financial capacity to do so is no longer available, the issue becomes structural and ultimately jeopardizes the growth prospects of entire segments of the supply chain.
Another unusual feature of the current market is the disconnect between prices and demand: costs continue to rise while consumption remains weak. How much does this affect companies' decision-making?
It is one of the most worrying aspects of the current situation. Traditionally, a market characterized by rising prices is also accompanied by stronger demand. Take, for example, metals traded on the London Metal Exchange: normally, higher prices also reflect stronger underlying demand.
Today, however, these two dynamics have become disconnected. Costs are rising while demand is weakening, and this is fundamentally changing companies' expectations. When prices increase without being supported by consumption, it becomes much more difficult to pass higher costs downstream, protect margins and, above all, have sufficient confidence to plan new investments.
Supply diversification is often cited as one of the main responses to increasing geopolitical instability. However, given higher logistics costs, longer lead times and new regulatory constraints, to what extent is diversification really a solution?
We are entering a phase of increasing market regionalization, with supply chains increasingly tending to develop within specific geographical areas. However, the companies we represent had already made enormous efforts to diversify, building strong relationships over the years with suppliers and partners located far beyond the European market.
The issue today is not so much finding new sources of supply as making them economically sustainable. On the one hand, we ask companies to diversify; on the other, instruments such as CBAM and safeguard measures effectively restrict their ability to do so.
Companies are therefore faced with insufficient quotas, high costs, increasingly expensive logistics and longer lead times, all in a market where demand is already weak. Diversification can therefore increase resilience, but without adequate competitive conditions it risks becoming an additional cost burden.
Access to ferrous scrap has become a strategic issue for the decarbonization of the European steel industry. What is your view of the possibility of introducing further restrictions on exports to non-OECD countries? Could such measures increase raw material availability for European steelmakers?
In my view, no, because the material we currently export is not being taken away from European demand; it is material that the domestic market is unable to absorb. Europe collects almost 100 million mt of scrap, while ferrous scrap consumption amounts to approximately 78-79 million mt.
Restricting exports to non-OECD countries does not automatically create additional domestic demand. On the contrary, the risk is that it would reduce the value of the material and, consequently, the incentive to collect it. Some grades could become economically unviable to recover and process.
That would represent a very serious step backwards. Over the years, Europe has built an extremely efficient collection, sorting and recycling system, which is one of the most tangible examples of the circular economy. Restricting commercial outlets when there is insufficient domestic demand risks weakening the very system we have built over time.
And this is precisely the point: companies must continue to take responsibility for building their own future, but they must also be given the conditions needed to do so. If the mechanisms supporting collection, recycling and, more broadly, the competitiveness of the supply chain are weakened, it becomes increasingly difficult to translate that responsibility into investment and growth.
What is therefore needed is an economic and regulatory framework that provides companies with greater visibility and allows them to plan and invest with greater confidence.
