* Italy's steel exports seen stable in 2012
* Italian steel makers seek export duty on scarps (Adds more comments, details)
By Svetlana Kovalyova
MILAN, June 5 (Reuters) - Output by Italy's steel industry, the second biggest in the European Union after Germany, will decline this year as the economic crisis bites ever deeper and is unlikely to return to peak levels any time soon, the head of Italy's steel industry body said.
Steelmakers across Europe are being hit by the economic decline in the region and euro zone debt crisis which sapped industrial demand. Italy, the euro-zone third-biggest economy, has slipped further into recession in the first quarter of 2012.
"Production volumes in 2012 not only in Italy, but in (all) Europe will not reach levels of 2011. The crisis is biting ever stronger, there is a strong fall in demand," Federacciai new chairman Antonio Gozzi told a news conference.
Italy's steel output rose 11.6 percent to 28.7 million tonnes in 2011, below 30.6 million tonnes produced in 2008 before the first wave of the global economic crisis hit industrial demand.
"It looks for now that output peaks of 2007-2008 are hardly reachable ," Gozzi said.
Only 70-75 percent of Italy's steel making capacity is currently used and the sector needs to consolidate, he said.
However, steel exports from Italy are expected to stay around the 12 million tonnes posted last year, helped by a weaker euro against the U.S. dollar which makes Italian exports more competitive in "dollar areas", such as North Africa, Gozzi said.
"I am more optimistic about exports. The level of exports should be stable, compensating for a fall in domestic demand," he said.
In the first quarter, Italy's steel exports rose 9.6 percent year-on-year to 4.808 million tonnes while imports dropped 29 percent to 3.540 million tonnes with demand from outside the European Union driving exports.
Italian steelmakers have to pay the highest in European electricity prices and import all iron ore that they use which put them at a competitive disadvantage compared to rivals from resource-rich countries such as Russia, Ukraine, Brazil and India, Gozzi said.
He said Federacciai, together with the European steel body Eurofer, is considering requesting the introduction of duties on exports of scrap steel from Europe on which the local industry depends for about 60 percent of supplies.
"Scraps are the only raw material that we have, our only mine. We want to protect it. All our competitors protect their raw materials, protect their scraps," Gozzi said.
Russia, for example, has a 15 percent duty of scrap exports, he said.
European steelmakers need to find an EU country which would formally present such request to Brussels and they would work on it in the next few months, he said.
Italy's Industry Ministry Undersecretary Claudio De Vincenti said the government would look into such request but it was too early to say whether Italy would spearhead such initiative.
"We first need to see the proposal and study it well," De Vincenti told Reuters on the sidelines of Federacciai's annual meeting. (Reporting by Svetlana Kovalyova; editing by Keiron Henderson and Sofina Mirza-Reid)