Speaking at the "New Horizons in Global Steel Markets" 14th Annual Conference organized by SteelOrbis in Istanbul on November 6, Tommaso Sandrini, president of Assofermet Acciai which represents Italian steel distributors, shared his opinion on the global trends in the steel market and their effects on the Italian steel market. Mr. Sandrini started by saying that a change of perspective is needed to get a proper understanding of the current scenario as geopolitics are now driving the moves of the main actors instead of the economy. He underlined that the global trade system and thus the global steel market are experiencing a deep revolution, i.e., the deglobalization and the dismantlement of the World Trade Organization (WTO). He added that trade wars and protectionism will be the "new normal" and that things will become more chaotic. Currently, the EU is unfit to manage this new scenario and will not drive the change. On the other hand, the US will be the protagonist of the change, and so Mr. Sandrini thinks we should look at the situation from their perspective. The US is dismantling the WTO for two reasons: it is not effective anymore in achieving its original goals, and the US wants to limit the ambition and growth of China. The reason why the EU is accepting the dismantlement of the WTO is merely economic as EU citizens do not accept the social costs of globalization anymore. According to Sandrini, bilateral negotiations will replace all multilateral trade agreements. Trump has already begun negotiating face to face with individual countries and has achieved more by doing this than through wider confrontations. He said he also thinks that the trade war will continue from the side of the US as a means of threatening the Chinese economic model and also the German one. These frictions will lead to a significant reduction of the scope of global trade, so that markets will become more and more regional. "The world has never been as competitive as it is today," Sandrini stressed, "and competition will be deployed at very different levels (economic, regulatory, fiscal, cyber, etc.)." In the short term, this will lead to an economic downturn for all major and emerging countries, while in the long term new investments and opportunities may arise creating winners and losers, he said.
As for European steel demand, this is experiencing an overall and long-lasting negative trend, and EU mills are under pressure. Sandrini went on to say that the recent revision of the EU safeguard system will have no significant impact on the current scenario and that imports will remain stable in the EU with Turkey as a privileged partner for the continent. This is due to the fact that the Turkish economy is much more integrated with the EU than what is commonly perceived. Also, the close relationship between Turkey and Germany will continue to provide support in the context of any confrontation between Turkey and the EU. Finally, despite the recent tensions with the US, Turkey will remain a key ally of both the US and the EU and will continue to play a leading role in managing the phenomenon of migration into the EU. Mr. Sandrini gave some advice to Turkish players from a buyer's perspective. He said that Turkish mills have the opportunity to increase the quality of their HRC as quality-wise their products stand below the level of other mills in Europe and outside Europe (such as India, South Korea, Taiwan and Japan). He added that Turkish players should be very quick to react to market requests, and that they should consider Europe as a second domestic market, especially in managing claims, as this is the best way to secure relationships with customers. Speaking of imports to the EU, Sandrini claimed that the safeguard system has been effective so far in reducing imports into the EU. However, he said that EU steel exports have not increased yet, and so he believes it is important to investigate the reasons why EU steel is not competitive in the global market. He also underlined that the EU's net trade balance with Turkey has changed in the last two years as Turkey was traditionally a net importer from the EU, while it is now a net exporter. However, he said that it is hard to tell whether this will be a permanent trend or not.
Finally, the Assofermet official commented on Italy as well, saying that in the Italian market the perception of the current situation is actually more negative than the reality. The automotive and white goods sectors are currently in a bad state and this year demand from these segments will be lower than in 2018, while forecasts for 2020 are negative. A permanent recovery cannot happen without a consolidation of the underlying technology and a stable regulatory environment, Mr. Sandrini said. On the other hand, shipped volumes in general industry in Italy have been in line with 2018 data so far. Sandrini said he believes that significant changes in purchasing attitudes will be necessary in the future. In fact, there will be a permanent shortening of order books, shorter delivery times, and combined negotiations will take the place of single agreements. Also, the lack of visibility is putting pressure on sellers, and market conditions are being set by buyers. All this is causing a lack of confidence in trade and also the fact that apparent demand is much lower than real demand. The situation regarding Ilva is going to add even more uncertainty since ArcelorMittal has withdrawn from the lease and purchase agreement of the Italian plant that will operate as an independent company starting from December 4. There has already been an additional reduction in production in Taranto, said Mr. Sandrini. He added that he believes that the ArcelorMittal decision is definitive and that it is not a negotiation strategy. Also, considering the level of hostility of local institutions towards Ilva, he does not expect any final solution on the matter. In the end, the Ilva shutdown will be disruptive in the Italian steel market and significant discontinuity is expected to result from this.