New increases in local Italian scrap market amid high tensions and uncertainty

Over the past week, local scrap prices in Italy have seen further increases due not to an increase in demand from steel mills but to the continuing shortage of the raw material. Market participants are divided in their expectations for price trends in the near future due to the many factors at play.

Although scrap prices are essentially stable internationally, local scrap prices in Italy have gained an average of €5-10/mt this week, despite not being supported by an improvement in demand from steel producers. Indeed, steel mills remain very concerned about the situation in the finished steel market, where they are struggling to close sales and obtain new orders, operating with very compressed or even negative margins. According to one source, “The situation may get worse. Some mills will slow down production. Those who can wait to buy scrap will wait'. Some traders share this view and are inclined to think that prices will remain stable in May as steel mills are unlikely to be able to absorb further increases, with one trader stating, “The sale of finished products is not changing either in terms of prices or orders. The risk is that, if the situation is not resolved, we will lose competitiveness to other markets'.

What is driving scrap prices up is in fact the scarcity of available raw material and this makes some market players more optimistic, with one source commenting, 'There are still good expectations for increases because less [scrap] is being found, especially from steel mills given the drop in production.” Another source agreed, noting, “There is more scarcity of material here than in the rest of Europe. We are heading for stock depletion.” Moreover, according to one trader, the increases of the last few weeks have not been “enough to shake the market and make those who have the material want to sell it. We live from hand to mouth. It is difficult to reconcile purchase prices with sales prices. Traders pay a lot when they buy, so many are not interested in selling at these levels and are waiting for further increases. That is why few contracts are closed.”

Prices include delivery and exclude VAT.

In the Spanish scrap market, local prices have risen by €10-15/mt in the last two weeks. According to sources, these increases are due to the need of steel mills to obtain faster deliveries in order to take advantage of lower energy prices, thus lowering their needs for imports.

Prices include delivery and exclude VAT.