Once again, it is hard to predict the direction of the market. In fact, what appears to be real in one quarter is immediately denied in the next. The only constant reported for the last two quarters is the weakness in industrial production. Europe’s leading steel mills are facing a substantial decline in sales volumes, which are they are seeking to mitigate through a reduction in sales prices and thus their margins.
All this has repercussions in the form of continuous downward pressure on scrap prices, especially on the Italian market. In fact, following the unsuccessful attempt by Northern European producers to buy fixed-price steel scrap in March, they raised their purchasing prices substantially in April. However, this did not happen in Italy where conditions have remained constant over the course of early 2019.
The effect of this marked difference between conditions in Northern Europe and in Italy has been to prevent Italian merchants from importing scrap from neighbouring countries; in some cases, scrap has begun to be exported to a more significant extent. But despite everything, and thanks to lower demand from the steel mills and higher nickel prices, it has been possible to meet the demands of the Italian steel mills.
The month of May promises to be just as difficult because the gap between Northern European and Italian prices has remained unchanged and the more recent weakness in nickel will not facilitate the collection of scrap. But as suggested above, this reality is almost certain to be denied by some change in the situation.
Nichel Leghe Spa (ITA)