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Market Overview: Italy’s steel industry caught by second wave of COVID-19

market insights

November 18, 2020

The second wave of COVID-19 and new restrictions have pushed the Italian steel industry back into uncertainty amid supply shortage. Get the full overview of how the steel and metals industry is fairing in Italy through the worldwide pandemic.

When the Coronavirus began spreading across borders and continents, Italy was one of the first countries heavily hit. Today, Italy continues to be one of the countries that are the worst impacted by COVID-19. As of today, more than 1,144,552 cases have been registered in Italy and the number of deaths has crossed 44,683 people.

After the first cases of COVID-19 were registered in Italy, it didn’t take long for the spread to cause a medical emergency in the country. To stop the spread extreme measures were used to confine the virus. With lockdowns and lack of work, Italy didn’t have just one emergency on their hands but two: The confinement measures also took its toll on the Italian economy.

In the first three months alone Confidustia identified that around 27% of Italian businesses have been hit on their profits because of the strict quarantine rules. The slowdown of the economy “could lead to over 50 billion euros of losses,” according to Giancarlo Turati, National President of Piccola Impresa.

Losses that in the past year also hit the Italian steel industry.

Monthly crude steel production in Italy

The gap between global production and capacity is expected to reach 700 million tonnes in 2020. That’s the first time since 2016 the gap stands to increase, the OECD steel committee anticipates.


The current situation in Italy’s steel industry

With the rapid fall in demand in early spring, many plants shut down work across Italy. Now, at the end of the year, many of the producers are back in production. However, the steel industry is still feeling the pressure caused by the Coronavirus. The steel production in the country is expected to drop around 15% in 2020 due to low demand and equally low production of steel, the President of the Italian steel federation Federacciai, Alessandro Banzato, told S&P Global Platts.

The low supply of steel across the different sectors isn’t the only thing putting a damper on the industry in Italy. The uncertainty of new corona restrictions in the country is an equally important factor. From the 5th of November until the 3rd of December an emergency decree is effective throughout the country. Due to the decree, Italy is divided into three different risk-zones depending on the spread of the virus. In each zone, different measures apply. How exactly they will impact the industry is still cause for concern, spurring hesitation amongst buyers domestically.


Lower production across sectors

The lower production can, for instance, be seen at JSW Steel Italy. Its longs production, such as bars, wire rod, and rails, was down by ~45% year-on-year in the second quarter of 2020, with a production of 60,000+ tonnes. However, JSW Steel Italy isn’t the only producer, whose production has gone down. The tight supply of long products across Italy has helped maintain price stability, especially on wire rod. Many Italian mills have plenty of orders to deliver throughout November, Metals Expert reports, which makes price changes unlikely in the near future.

A similar picture is forming in the Italian coils market. After taking a massive hit with dropping prices and lower demand, the sector has calmed down in the last months with stable pricing. Currently, customers in need of coils will have to wait until the new year, as there is a shortage of the product with short and medium delivery time. Especially sort after is the hot-rolled coil as the demand from the white goods and the automotive sector is rising again after production was shut down earlier this year.

In the first ten months of 2020, sales in the car market went down 31% year-on-year. However, the month of September turned the downwards curve up with an almost 10% increase compared to the same month last year. With the increasing demand for Italian made cars and the eco-bonus initiative from the Italian government, the need for flat products is set to continue increasing.


Learnings from the past year

However, not all countries have had the same issues. Unlike in Europe, China has reached new levels of crude steel output throughout 2020. In August, the country produced around 95 million metric tonnes of crude steel. The country was ramping up its production, while Europe was struggling with its supply.

The vast difference in production highlights two of the main issues, not only for Italy but for the European steel industry in general: The lack of sustainability and digital technologies. Here is why.

Digital technologies can move industry forward

The pandemic and numerous lockdowns across the world has impacted the industry as well as the international supply chain. Firstly, the many lockdowns across Europe put a strain on the production of raw materials that the mills need. Raw materials, that are already in shortage during normal production, making Europe dependent on resources from third countries. A disrupted supply chain makes it even more difficult to get the produces needed. The pandemic has shown just how much the industry needs a more flexible supply chain structure that can help steel mills and foundries remain operational.

On top of that, a disrupted supply chain creates a need to find new partners. However, with cancelled trade fairs, networking has become increasingly difficult this year. Not just for Italy, but all over Europe.

Using digital technologies can help increase sustainability levels as well as increase efficiency both in short term spot buying as well as long-term contracts.

Online trading platforms such as Metalshub ease up the rigidity of the current supply chain structure, as the platform helps buyers and sellers find new partners at short notice. Digital procurement can help market participants boost their efficiency and reduce costs. To reduce costs and risks when trading, Metalshub also offers real-time price insights with its Price Discovery Service.

Schedule a demo here, and learn how Metalshub can help your business become more efficient and find the partners you need.

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