Italian Market Situation - Jan 21

After my speech during MMSteel Club meeting last 25th of January, I would like to share my view of italian market. Nothing honestly new, but is a quite good recap.

You can find my speech on https://777.mmsteelclub.com/

https://www.youtube.com/watch?v=79YhxY5nae8&t=4s&ab_channel=MMSteelClub

What we will discuss?

?Price development

?Local mills situation;

?Production status;

?(No) availability on the market;

?Market shortage;

?Reason behind increase of price

?Forecast for the future – what next?

What’s going on? - price

Price at the maximum level since 10 y

What’s going on? Availability

Mills are fully booked until end of Q2.21.

20 w lead time vs normal 10 w lead time: you order at high price and you don’t have the material!

Focus on Italy:

Ilva: Forecast 2021: 5 mio t

BUT after restarting blast furnace in Feb 2021.

Arvedi: limited quantity to the market

No import from Turkey, Korea.

Mills are increasing the production – BUT is foreseen in the next months.

Tight availability of steel supply will last at least until Q2.21

Safeguard: will be confirmed? - The European Commission is being pushed by 12 member states to review the existing steel safeguard that is due to lapse in June.

NO Material on the market – across the globe!

To buy or not to buy? That is the question..

Service centers are worried to buy material at this level of price – fearing a drop in the coming months.

SSC are reducing the purchase – they buy only to cover spot orders.

Apart very few of them, there is no stock and no material in the market, even to fulfil the contract agreements.

In this moment the main problem is to find the material more than the price level.

End users are struggling to receive and find material not to stop the factories.

Many mills are cancelling agreed frame contracts (volumes and prices) and rediscussing agreed price (spot orders).

SSC are not buying – only to cover spot orders

Perfect storm: what is behind?

?Price sustained by lack of offers, more than real increase of demand.

?During Covid-19, mills cancelled 30% production. Capacity No yet recovered.

?Offer and production disruption (accident in EU, CIS, SK).

?Raw material increase – see the graph.

?Demand sustained by automotive and home appliance – BUT see the news.

The main steel mills are reducing availability.

Price sustained by lack of offers from the market

What next? Will this level of price last?

?No real economy increase that is supporting this level of price.

?Similar situation of 2008, but at that time there was a demand increase behind.

?As average GDP 2020 – 9,2%, forecast 2021 +3,5%, 2022 +3,8% and 2023 +2,3%. Return to pre-Covid level on 2023. [forecast Banca d’Italia]

On 31st of March in Italy will end the “lay off” prohibition (possible extension to be discussed in the next weeks): everyone foresee a dramatic increase of lay-off after this period.

Question is: When the bubble will explode?