AM Italia, Italian coils market look nervously at court order to shut hot-end operations

New York — Supply and lead times for coils deliveries are a problem an Italian steel flat market looking with apprehension at the latest news about ArcelorMittal Italia, the country's largest coils producer, sources said Feb. 16.

Large Italian re-rollers are becoming anxious as some of them have ordered materials from ArcelorMittal Italia in response to good apparent and real demand.

An Italian mill source said lead times "longer than before" were contributing to higher market prices, with new lead times heard as far out as August for products like hot-dipped and pre-painted galvanized steel products.

ArcelorMittal Italia, also Italy's largest domestic flat producer, was told Feb. 13 by the Lecce regional administrative court that it should shut within 60 days all hot-end operations at its Taranto plant to curb emissions. The decision was a surprise and to which the company, backed by the plants' unions and by industry associations, has said it quickly appealed to Italy's Council of State. Sources said it is possible the Council of State in the next couple of days temporarily suspend the court order.

With limited existing availability of coils in the European market, this new and unexpected crisis facing the former Ilva could put the end-user supply chains, already hit hard in recent weeks, in even greater difficulties, market sources said.

"[Customers] are afraid that Ilva may really close this time," an Italian service center source said. "With the difficult situation of the European market, and the limited availability of coils, this new and unexpected crisis of Ilva could further raise prices and put end-user supply chains in difficulty, already hit hard in recent weeks."

The same source added that Italian producers were having a lot of difficulties with making prompt deliveries.

"For this reason we are seeing a phase of great nervousness from our customers who are probably not receiving everything they ordered from the service center system," the source said.

Delivery lead times into June

Italian buyers said that HRC transaction prices are reported at around Eur705-715/mt base ex-works. According to Platts data, Italian daily HRC prices have risen Eur 48/mt to Eur705/mt base ex-works since Jan. 4.

June arrival lead times are being reported for new HRC production into Italian service centers from European mills, along with small volumes and limited quality choices for April delivery of existing stock.

"Indian quotas, for example, for HRC are close to finish and prices are not so attractive either, so better to buy from domestic mills," a source from a large Italian service center said Feb. 16. "The problem is that lead times from European are still very long and now we don't even know if we can have materials from Taranto."

India has been a prolific presence in the EU marketplace, with offers heard at Eur675-695/mt CIF Italian ports. India's quota allowance is at the brink of exhaustion, with just little over 8,000 mt, or 4.6%, remaining.

Just few weeks ago, ArcelorMittal Italia restarted its blast furnace # 2 at Taranto to boost its crude steel output in 2021 to 5 million mt from 3.4 million mt produced in 2020, while Invitalia, Italy's agency for investment promotion and enterprise development, signed an agreement with the company to enter into a public-private partnership.

"Without going into the merits of what ruled by the Court -- which will evidently be discussed in subsequent stages of judgment -- the fear is that this act could stop or slow down the process of rehabilitation and relaunch of the factory," Federacciai, the Italian steel association said in a note Feb. 15. "Our hope is therefore that a suspension of this sentence will be adopted and that the newly appointed Government will do all it can to avoid the shutdown of the largest Italian steel plant."

Italy's new government, led by former European Central Bank chief Mario Draghi, was sworn in Feb. 13, the same day the court sent its decision about Taranto plant. Draghi and its government, like all the previous governments, will have to address once again the issues between the former Ilva and some Italian courts.