The situation regarding raw materials has become an emergency and Italy-based Feralpi, like many other players in the steel market, complains of increases in prices which have never been seen before, as well as a lack of availability that may jeopardize the production continuity of several plants across Europe. But more than that, the inadequacy of infrastructure is also a problem, as it risks slowing down the current phase of economic growth. SteelOrbis discussed these issues with Cesare Pasini, vice president of Feralpi Holding Spa and managing director of Acciaierie di Calvisano Spa.
What has been the trend of the Italian scrap market in recent weeks and how do you foresee the price trend in the coming months?
Over the past two to three weeks, the Italian scrap market has found a balance. This could be a temporary situation, but I already consider it a good result. The outlook for July is still unclear. In the international markets, prices are almost stable since Turkish mills have not been very active. As a result, recently it had been predicted that prices would follow a sideways trend in Europe as well. Negotiations for the usual monthly contracts are still underway with French and German suppliers; however, the news has emerged that Austrian steelmaker Voestalpine, in a somewhat unexpected move, has raised its purchase prices by €30/mt. Suppliers expected unchanged prices, French suppliers especially, while the Germans were not convinced but could have accepted stable prices given the lack of activity from Turkish steel mills. At a time when people were struggling to find a balance, Voestalpine's move took everyone by surprise and now it is reasonable to expect new price increases. As regards August, there will be summer stoppages as usual, and these will freeze the market a little, while for September it is impossible to make forecasts.
During the press conference to present the 2020 consolidated financial statements of Feralpi Group, you mentioned the explosion of prices of raw materials, but also the critical issues regarding the inadequacy of infrastructures. Could you tell us more about this?
For some time we have been struggling with the problem of infrastructures, which are inadequate with respect to the needs of the Italian steel industry, both for the shipment of finished products and for the receipt of raw materials. Ports are congested, while railway networks are fully busy and unable to accommodate additional traffic needs. We recently had to give up on sourcing some material because we did not know where it could land. This is a critical issue that we have to deal with today and that will probably be felt in the months to come, also in consideration of the heavy rainfall and the floods that occurred in Munich in Germany at the end of June, sending the local railways into a tailspin. Rail wagon shipments arriving in Brescia from Germany are facing great difficulty. All suppliers right now are struggling to fulfil contracts and it may take weeks or even months for regular traffic to be restored. This situation is affecting scrap above all, as the German suppliers are for the most part structured for shipments by rail. Finished products are less affected as we are able to ship them by truck.
In recent weeks, there has been talk of possible ways of blocking scrap exports from the EU. What is your opinion on this issue?
Europe introduced the Green Deal and aims to achieve climate neutrality by 2050, and so it has embraced the idea of a circular economy. To give substance to this, however, we must ensure that the resources that allow us to carry out this ecological change are somehow protected within the European Union. We cannot talk about the circular economy and then let our scrap go to third countries that have no idea what the circular economy means. I think it is appropriate that a large amount of the scrap that is exported from the EU should somehow be protected or at least subject to export limitations - we are talking about 17-18 million tons per year, that is, more than what Italy consumes. Otherwise, it is not possible to pursue the objectives that Europe has set itself for the years to come. I think exporters could be forced to sell only to those who have proved that, like European producers, they have adequate facilities to receive scrap and melt it without emissions - in other words, to plants that can treat scrap as we do. This would already be a good result, because there are not many plants around the world like those we have in Europe, i.e., which are environmentally friendly.
What do you reply to those who point out that scrap is abundant in the rest of the EU and that therefore scrap exports are a necessity?
We cannot afford the exportation of 18 million tons, not only since scrap is a precious raw material for the European steel industry, but also in view of the environmental policies that Europe is committed to pursuing: the conversion of blast furnaces to electric furnaces implies an increase in the consumption of scrap in the coming years. Consequently, what we export today must somehow be kept within our borders.