[ferro-alloys.com]Italian steel producers lost 1 million to 1.3 million mt of output during the stringent four weeks of coronavirus-prompted lockdowns and now they all have resumed production, working at around 40-50% of their capacity with most of them executing COVID-19 precautions, reliable industry sources told S&P Global Platts on Tuesday.

Mill executives confirmed they are working at just about one month of market visibility in an unprecedented setting with problems such as assessing future demand, in particular from key steel industry sectors like automotive and construction. Those markets are still on hold and when they reopen are unlikely to restart at full capacity.

The Italian government signed a decree just before the Easter break aimed at loosening restrictions made to stem the spread of the coronavirus after around four weeks of lockdown, but it did not include the steel sector. Steelmakers nevertheless started to slowly reopen the week of April 13 after local prefectures granted them permission.

Italy is Europe's second-largest steel producer, making about 23 million mt annually. But unlike most other European countries, many of Italy's mills stopped production during March 16-23, with the only exceptions being ArcelorMittal Italia in Taranto, southern Italy, and Arvedi in northern Italy.

"To understand the demand for the coming months is the real key issue, if [state] investments in infrastructure will not take place, it will be difficult to recover a big part of the demand that is unlikely to be at the level of the previous years as cars, but also white goods, sectors are unlikely to rebound as before," a source from a leading steel Italian association commented.

According to latest data available from Federacciai, the Italian steel producers association, in March Italian crude steel production went down by 40.2% month on month to 1.37 million mt, only partially representing the lockdown period.

Automotive production and building construction are expected to resume by decree next week, but having customers is not the only problem for steelmakers. They rely on steel scrap generation from manufacturers like automakers to feed their furnaces and this has become difficult due to their lockdowns. Most Italian steel mills are based on electric arc furnace steel production, which requires scrap, with the only exception being AM Italia, which has blast furnaces. According to industry sources, with the mills working at 40-50% of their capacity, scrap will become relatively difficult to obtain for about a month.

These sources estimate Italy produces around 13.5 million to 14.0 million mt of scrap per year, satisfying 70% of domestic steelmakers' demand, with the rest being imported.

With the lockdowns easing, market participants are closely watching the scrap supply/demand balance, as this will impact raw material prices as well the steel product prices, and therefore steelmaker profit margins.

Since the beginning of the lockdown Italian scrap prices have declined by around Eur20/mt, sources said. Scrap dealers told Platts on Tuesday that since the beginning of this week scrap prices went down only slightly, off Eur5/mt week on week.

On April 10, the TSI-Platts monthly southern European scrap price – an average of all southern European countries – at Eur237.50/mt delivered for April contracts, down from Eur255/mt delivered in March and February.

(S&P Global Platts)

• [Editor:王可]