The Italian Steel Industry among national and European challenges: what prospects for development?

The document analyses the state and prospects of the national steel industry, investigating critical issues to be addressed and main competitive advantages to be leveraged, also in the light of the global geo-economic context and the challenges of the energy transition.

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• Italy is the second largest steel producer in Europe, after Germany, and the eleventh in the world. Over 85% of production is secondary steel, made from scrap iron in electric furnaces.
• Steelmaking based on the electric furnace is a national technological excellence, consolidated since the post-war period, which allows the sector to achieve higher productivity levels than its main competitors. The Italian iron and steel industry boasts 135.6 thousand euros of added value produced per employee, ahead of Spain (125.8), France (125.6) and Germany (101).
• Italy is also second in Europe for steel consumption. This is among the key inputs of several strategic supply chains such as construction, industrial machinery, automotive, energy and electronics.
• Thanks to the strong prevalence of electric furnace production, the Italian steel industry holds sustainability records: it is first in the EU for recycled and reused ferrous scrap and, among the world's leading producers, has the lowest emissions intensity
• Despite its undoubted strengths, the Italian steel industry faces at least three major criticalities:
  • the crisis in the integral cycle, closely linked to the decline in the activities of Acciaierie d'Italia in Taranto, the main national producer of flat rolled products, only partly offset, in terms of volumes and product specificity, by other electric furnace plants;
  • the consequent drop in domestic production of flat-rolled products, fundamental for the manufacture of key components in sectors such as mechanics, means of transport and household appliances;
  • the shortage of ferrous scrap, the demand for which will grow considerably in the coming years in Europe, and structurally higher energy costs than peers.
• In addition to national phenomena, there are three main challenges that the Italian industry shares with other EU countries:
  • the global production overcapacity, to which the large steel mills of China and India mainly contribute, which is among the causes of the underutilisation and drop in profitability of European plants;
  • US trade policies, which as of 2018, due to duties and import quotas, weaken the international projection of European industry;
  • the potential increase in costs for the supply chain resulting from the introduction of certain EU climate policies, in particular the Carbon Border Adjustment Mechanism (CBAM) and the reform of the Emission Trading System (ETS).
• Against this backdrop of light and shadow, action for growth in the sector will have to take place along three lines:
  • industrial policies and trade measures coordinated between the EU and the US in order to jointly tackle overcapacity and encourage the adoption of higher environmental standards;
  • strengthening and expansion of production facilities, starting with the revitalisation of major steelmaking centres, while preventing the competitive displacement of existing plants and destabilisation of the scrap market;
  • accompanying companies in ecological and digital transitions:
    • supporting the decarbonisation of the sector through energy efficiency measures, the development of alternative technologies and green hydrogen
    • supporting the application of IoT sensors, Artificial Intelligence and digital twin.