April began with optimism on the scrap price front, said Assofermet, the association representing Italian distributors of scrap, raw materials and steel products, in a press release.
March had an "uncertain and at times dramatic" beginning due to the Russian invasion of Ukraine, which "gave the definitive green light to the problem of energy and fuel supplies, including costs" and brought "almost all Italian steel mills to announce forced stoppages, which lasted about a week." The same steel mills later returned to buy scrap by raising their purchase prices, both due to the slower pace of energy price increases and due to the need to complete their sales orders. Accordingly, there was "a frantic search for scrap that led Italian prices to rise by more than 20 percent." Assofermet underlined that during the month there was a reduction in the gap between the prices of lower and higher categories of scrap, with particularly important demand for medium-low grades, such as heavy scrap.
For scrap dealers, it was "difficult to understand the attitude of Italian steel mills, which initially maintained lower prices with domestic traders, while they paid much higher prices to EU scrap processing plants, German and French mainly."
As regards the month of April, Assofermet expects a partial recovery of the gap with respect to international prices. "The signals from beyond the [Italian] border are, among other things, oriented towards further increases, which could push prices to new historical records. The real dilemma is now how much this climb can still persist given that both finished product and scrap prices have reached levels that are now difficult to sustain by an economy that is partly crippled and strongly conditioned by the ongoing war. Raw materials at an all-time high, expensive energy, difficulties in supplying products, war on the doorstep of Europe, and, lately, financial difficulties linked to rising prices: if these are the fundamentals of the current economy, the real question is not whether but when the wind will turn and how much damage it will do."
Looking abroad, Assofermet spoke of a "dynamic international market", with high transaction volumes and prices. Once again, it was Turkey that pulled prices up in March. Good international trade is also expected for April, despite the fact that freight rates are constantly increasing. Scrap traders in all European countries are demanding further significant price increases from steel mills.
In Germany and France, scrap prices in March were higher than those recorded in the Italian market. Assofermet expects further increases, depending on the quality and the country of origin.
As for basic pig iron, the month of March "saw an escalation of prices that sent us back to the pre-crisis period of 2008, with peaks over $1,000/mt CIF in the US market for material from Brazil," said Assofermet. High prices were also recorded in the Italian and European markets, even if lower than in the US. In early April, the uptrend slowed down due to the return of Russian material, albeit to a limited extent. Steel mills are trying to reduce as much as possible their dependence on the use of pig iron due to high prices and uncertainty regarding the introduction of further sanctions against Russia. Assofermet highlighted that "the scenario is more critical for foundries, for which the possibility of reducing the consumption of pig iron is currently more difficult to implement."
Finally, speaking of ferroalloys, Assofermet affirmed that the Russian-Ukrainian crisis "is putting in difficulty not only the supply chain, but also the finding of alternatives to products from these countries." Creating regular flows from alternative sources will take a long time. Due to the sanctions, supplies from Russia "are coming only very slowly, especially for FeCr. Even shipments of manganese and silicon alloys from Ukraine are difficult due to the blockade of the country's ports and the problems associated with land transport to EU countries". Compared to February, in Europe and Italy, FesiMn prices recorded a 40 percent increase, as did FeCr, said Assofermet. "In the event of a prolongation of the conflict, European buyers will be forced to concentrate purchases on alternative sources in Malaysia and India, with a significant lengthening of delivery times," continued the association. A fairly stagnant European market with high prices is expected for April, "as most of the purchases by EU steel mills covered a medium-to-long-term period for fear of not finding the necessary tonnages in time. A slightly different behavior has currently been adopted by the Italian steel mills."