This week, the situation in the Italian flat steel market has remained unchanged. Prices are fairly stable as hot rolled coils (HRC) are still offered at the base price of around €450-460/mt, cold rolled coils (CRC) are at €510-520/mt, while hot dip galvanized (HDG) coil prices are standing at €500-510/mt, all ex-works.
Prices may have actually touched the bottom, but market players do not exclude the possibility of further setbacks. Although prices are officially unchanged, in negotiations suppliers tend to give discounts to their customers even though profit margins are extremely tight. Also, some sense new decreases, although it appears that no operator wants to take the first step in this direction.
The market atmosphere remains tense, with the problem of insolvency continuing to be felt. Faced with ongoing slackness of demand, national producers and service centers still feel unable to draw up long-term plans.
According to most market players, a rise in prices seems likely to materialize only at the beginning of next year, with reduced supply expected to be the main factor supporting any price increase. In the first six months of 2012, in fact, flat steel supplies in the European market fell by more than 10 million mt year on year and production cuts continued in the third quarter. In addition, output will be even lower in the fourth quarter due to the holiday break. This should result in a reduction in supply and an increase in prices of flat steel within the EU countries.
Meanwhile, the threat posed by Chinese imports has not yet materialized. Offers from China, though competitive, have not translated into orders for large volumes. Chinese steel mills have been able to focus on the Middle East and North Africa (MENA) countries, which traditionally constitute an important outlet for the products of southern European steel mills. In recent months, the lack of opportunities on the export side has pushed European steel producers to focus on their domestic markets, intensifying competition and thus contributing to the weakening of prices.