There are several reasons: territorial (i.e. as regards land resources), historical and technological. Italy lacks mineral resources, and so in the post-Second World War period, a time when the local steel industry saw major growth, producers opted for electric furnaces, which were invented at the beginning of the last century. Since then technological evolution has brought an increase in outputs and, consequently, an increase in scrap needs. With regard to this question it is important to underline that currently Italy is the no. 1 European producer of steel by electric furnace method.

Italys scrap exports have been rising since the beginning of the year. Could this prejudice the demand-supply equilibrium?

We will be keeping a close eye on this issue, but at the moment it is not a problem for the Italian market. Italys scrap exports remain primarily a spot market business which allows occasional commercial opportunities for Italian traders.

Are there changes in the Italian import markets for scrap?

In the last few years there have not been any changes. The Italian mills, which currently import about 25 percent of their scraps need, mainly purchase the raw material from European countries like Germany, France, Austria and Hungary. If we consider that we are in a global market and that these countries are members of the European Union, perhaps it may seem a bit unusual to define this commercial activity as ‘import. Italys more distant import markets for scrap are the US, the Baltic region, the Black Sea and North African countries; these are the main spot markets for Italian mills.

In the recent period important fluctuations in the costs of scrap have been registered in the international markets. Does this dynamic also condition the prices of scrap in Italy?

This dynamic has certainly conditioned the prices of scrap in Italy. On an international level, the increase in prices of iron ore seen in the first months of this year sparked an increase in the costs of scrap and, being in a global market, this has also had almost an immediate impact on the local Italian market. In the most recent period in particular, as SteelOrbis has consistently underlined in its analyses, in the international arena the trend of scrap quotations appears to be conditioned by the attitude of the Turkish and Chinese buyers. In this regard, it seems that the Italian market depends primarily on the decisions of the Turkish buyers.

As SteelOrbis has reported, relations between Italian steel producers and local scrap traders have of late been characterized by a certain tension. In some circumstances, relations appear to involve attitudes of mutual antagonism. What problems are at the root of this situation?

We could say that relations between steel producers and local scrap traders have never been ‘idyllic, I would like to underline, however, that the tensions that can arise from time to time are inherent in the commercial situation in which contacts come to be settled. In the recent period it is possible that nerves have been more tense than usual, but this has been substantially due to the number of problems in the market. Considering that the steel producers and local dealers are united by a bond of mutual dependence, I believe that with time relations will improve, in the interests of both parties.

How is scrap trading performed in the current period: i.e., via supply contracts or through the spot market?

Contrary to the situation in Europe, where supplies are primarily bought through monthly contracts at fixed prices, in Italy different methods of purchase coexist and it is difficult to establish a clear picture. With the price volatility observed in the recent period, for the mills it has become important to ensure greater continuity in supplies both in quantitative terms and in terms of price, and for this reason mills are moving more and more towards the use of contracts. This is a work in progress and it is also difficult to manage due to the fragmentation that characterizes the local scrap market of the scrap. Nevertheless, the elaboration of commercial practices of this kind without doubt represents an important objective for the Italian steel producers.

How do the Italian producers tend to manage their stock levels? Are there recurring strategies that may be considered ‘typical?

In Italy strategies of stock management are essentially conditioned by factors of a structural character that represent a problem in some circumstances. Scrap storage facilities have not in all cases been increased in line with technological evolution and the consequent increase of output and consumption. For this reason, strategies vary from producer to producer. At the moment some mills operating at maximum capacity utilization need to receive supplies on a weekly basis; this negatively impacts the scrap trade, thereby also affecting producers that have suitable structures in place.

Could you tell us about the anticipated updating of classifications of scrap in the EU?
Currently, the European Union is completing the establishment of specific norms that, according to forecasts, should take effect by the end of this year. The distinction between cases in which scrap must be refused due to poor quality and those in which it can be labeled as second grade raw material will finally be clear and uniform for all the countries of the EU. This change will be viewed favorably by the producers because the Italian norms are vague and have given rise to interpretations that in some cases have made imports difficult and slow. In fact, in the last few years sequestrations of scrap and blockages have happens at Italian ports for reasons of a bureaucratic nature.