On March 9, Italian authorities extended the lockdown from northern areas across the whole country in an attempt to control the outbreak of the 2019-nCoV coronavirus.
Long steel production affected
Two major long steel producers in Brescia, Alfa Acciai and Ferriera Valsabbia, stopped production on Wednesday morning due to coronavirus issues, sources told Fastmarkets.
Alfa Acciai confirmed its production stoppage to Fastmarkets, but Ferriera Valsabbia had not responded to a request for comment by the time of publication.
The availability of long steel products, however, was unlikely to be affected in the short term, according to the market sources,
“Both mills will keep delivering because Italian producers usually carry a stable huge stock,” a long steel trader said.
Alfa Acciai has capacity for 1.25 million tonnes per year of rebar and 800,000 tpy of wire rod. Ferriera Valsabbia can produce 750,000 tpy of rebar and 150,000 tpy of wire rod at two plants, according to Fastmarkets’ Capex quarterly service.
A German source said that some European mills have already settled their monthly scrap contracts with an increase of €10-15 ($11-17) per tonne, although at the same time buyers were asking for a €5-10 per tonne price reduction for rebar.
Due to this - and combined with some shipment problems, the lockdown in Italy and concerns related to coronavirus in the market - some Italian mills might choose to stop their operations, the source said.
The lockdown has already resulted in a slowdown of trading activity in Italy, market sources said.
“Buyers are very cautious because [the 2019-nCoV coronavirus] is developing very fast and nobody has the slightest idea about the imminent future,” an Italian distributor said.
“The market is frozen,” a major long steel producer said. “We are delivering orders made in previous weeks, but no new orders are coming in.”
The lockdown situation has not had a major effect on shipments yet, but some Italian sources believed that the logistics problems were likely to escalate and have consequences for production.
“Transportation is not a problem yet. Drivers are taking [note of the] safety requirements from the government. There are no problems now, but tomorrow may be different,” a second Italian trader said.
“There is no direct effect now because commercial traffic is free to move in and out. [It is] too early to expect [any negative effects to be visible]. There is a big question mark,” a European steelmaker said.
Overall, no major issues with deliveries by rail or by sea have been heard.
Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), domestic, delivered Southern Europe, was €435-450 ($494-511) per tonne on March 11, narrowing downward by €5 per tonne week on week.
Fastmarkets’ weekly price assessment for steel wire rod (mesh-quality), domestic, delivered Southern Europe, was €450-470 per tonne on March 11, widening downward by €5 per tonne week on week.
Flat steel unaffected
In the meantime, flat steel production in Italy has continued without disruptions, market participants said. But producers did face some logistics problems, notably with steel deliveries to Germany and Austria by truck, according to the sources.
“So far, there have been issues only with some shipments outside Italy. It is hard to find truck drivers and the procedure when crossing borders is rather complicated. So there are some disruptions in logistics, but the [flat steel] mills are operating as normal,” another Italian distributor said.
“I also believe that there is a panic element in the market now,” he added.
Market participants have been concerned that the Italian authorities might toughen the quarantine measures in Italy and production would have to be stopped.
“It is impossible to predict the next move by our government, but it is possible that we will see production sites being temporarily shut down. But so far no closures [of flat steel producers] have been made,” another Italian source said.
The majority of flat steel buyers both within Italy and in neighboring countries have reported no issues with shipments but they believed that delays were likely to be seen soon, due to the shortage of truck drivers and the complicated border procedures.
Some buyers in Germany and Austria claimed to have already faced disruptions of deliveries of flat steel by trucks. But they also believed that these delays would not be long and were unlikely to have significant consequences for the market.
The reduced interest among Northern European buyers for Italian coil products might have a short-lived positive effect on domestic prices in the north of the EU, market sources said.
Fastmarkets’ daily steel hot-rolled coil index, domestic, exw Northern Europe, was €481.00 per tonne on March 11, down by €0.07 per tonne day on day.
This followed a drop by €3.55 per tonne day on day on March 10.
Wednesday’s index was based on deals heard at €475-480 per tonne ex-works, “workable” prices heard at €480-485 per tonne ex-works and official offers reported at €500-520 per tonne ex-works.
Fastmarkets’ weekly price assessment for steel HRC, domestic, ex-works Southern Europe, was €435-450 per tonne on March 11, compared with €440-450 per tonne a week earlier. The assessment was based on deals heard in the market.
Carrie Bone in London contributed to this report.
The enlargement of the quarantine zone in Italy to a nationwide reach has already started to affect steel output, with at least two long steel mills announcing production stoppages, sources told Fastmarkets on Wednesday March 11.