After the weakening of local scrap prices and the support provided for them by the weakening of the euro against the dollar, the Italian scrap market has returned to a period of apparent stability.
As discussed in our previous analysis, currency is currently a key factor for the steadiness of local prices, which at present are at around €300/mt ($405/mt) for HMS, €340-350/mt ($459-473/mt) for shredded scrap and €360-365/mt ($486-493/mt) for busheling. There is a slight decline of €5/mt for the most valuable qualities (busheling and shovelable), due to the high levels reached by market prices, which have been pushing manufacturers to prefer the use of lower grades of scrap for a while. Moreover, market participants polled by SteelOrbis state that the price decline represents a slight closing of the gap between prices of higher and lower grades which, they say, had expanded excessively.
The outlook for the last three months of the year remains hazy, given the uncertainty of the macroeconomic situation (particularly, the uncertainty in financial markets) and the stagnation of output in the construction industry, for which there are no developments in view. Of course, the dependency on exports is not entirely positive, since it binds the mood of the markets to the currency exchange volatility, which currently curbs the introduction of huge volumes of raw materials into the market, but in turn does not give long-term guarantees. End-user demand in Italy remains modest and therefore under observation from here to the end of the year. Federacciai data for the month of August have confirmed the significant recovery of crude steel production (up 11 percent in January-August compared to the same period of 2010), although most furnaces are still exploited at much lower rates compared to 2008.