The Italian domestic scrap market has been characterized in recent weeks by a certain degree of disappointment as the market failed to see the recovery that had been anticipated for the month of May. Contrary to expectations, a similar sluggishness in demand and in activity was seen in May, compared to that seen in March and in April. Italian steel mills are still operating at around 40 percent lower than normal capacity and some mills are expected to halt production during the coming week.
At the end of April, a series of successive increases in scrap prices was seen in the Italian market - €10/mt, €15/mt and then €10/mt - totaling €35/mt. However, a sudden decrease of €20/mt then followed in May, causing panic among market players and thus inspiring a surge in sales activity for a few days. After a certain period of stability, the market lately saw a slight increase of €10/mt.
The abovementioned price movements have had a negative effect on rebar sales activity in the Italian market. Rebar sales had gained momentum up to about two or three weeks ago increasing to €380-390/mt; however, when scrap prices started to fall, buyers also halted their rebar purchases.
At present steel production volumes in Italy do not appear to be set to increase. On the contrary, some halts in operations are scheduled for next week, possibly creating more room for scrap prices to fall, even if only, as market players predict, by a slight margin of €5-10/mt.
Scrap availability in the local Italian market is still weak, but with the output cuts implemented by many mills the available volume has consistently been sufficient to satisfy current production needs. With some buyers having to buy to meet current needs, the competition between customers has become fiercer.
So far the financial sector has evaluated customer reliability on the basis of last year's results; however, the banks are now requesting their customers to present the results for Q1 or for the first four months of the year, which are not so favorable. Consequently, many banks are tightening credits and loans to their customers. This trend is likely to intensify over the coming months.
According to many market players, the market will be characterized throughout 2009 by some sporadic periods of recovery in demand; such occasions, they say, will have to be grasped immediately because they will be brief, and it will be useful to try to predict them with accuracy.
As for prices, in the Italian market busheling scrap currently stands at levels of €180-190/mt delivered to customer, while demolition scrap stands at €160-170/mt. Shredded scrap prices, on the other hand, are in a range of €170-180/mt, also delivered to customer.