Billet price was
downward during last week in Iran steel market. It’s average price dropped by
USD 2/mt to USD 648/mt ex-work including VAT. The recession in rebar market
and, more importantly, government's pressure to reduce prices at IME (Iran
Mercantile Exchange) were the main reasons behind this trend. Government's
policy made billet supply level at IME 50% lower than a week ago, and sales with
delayed payments also stopped. Over the weekend, power cuts and rising exchange
rates prevented further price declines.
Rebar price fell in
the first half of last week, but then the market resisted against further
decline. Average price dropped from USD 736/mt to USD 734/mt. Power cuts,
rising exchange rates and market negative sentiment against effectiveness of
government policies were the main reasons behind stoppage of downward trend.
I-beam had a stable
trend and showed a slight improvement over the weekend by USD1/mt to USD 676/mt.
Market situation was the same for rebar and I-beam.
HRC 2 mm thickness
ex-work Mobarakeh was USD 963/mt on last Saturday, which reached USD 946 /mt by
Wednesday. Heavy supply of Mobarakeh Steel co at IME, following cancellation of
the deal and its renewal with new conditions, gave market the view that downward
trend for Mobarakeh co HRC would be limited. Buyers who had bought at IME started
pre-selling their goods to be traded on IME, and because of this, market was
declining, but most of those involved believe that prices will rise again.
Lack of demand has
pushed Oxin co HRP to its lowest price. The only factor that may affect the
market of this product is lowering price by the mill, but the main problem is
that the mill has not delivered previously purchased goods yet.
With Mobarakeh Steel
co supply, CRC price began to decline from USD 1211/mt to USD 1205/mt, but higher
ex-rate prevented further price reductions.
Lower HRC price affected
HDG market too, but higher ex-rate, which caused the price of zinc to rise,
disrupted HDG market too. Its average price dropped from USD 1211/mt to USD 1195/mt
ex-work including VAT.
At the moment on the
demand side, market is confused and has no decision-making power. The signals heard from unofficial sources
close to the government indicate a decrease in the base price of DRI and billet
at IME to USD 343 /mt and USD 529 /mt respectively in the near future. Billet
producers will resist against this trend because they are still producing with USD
388/mt DRI stock.
IME announced that
DRI price in the coming days would be USD 371/mt excluding VAT, which shows a
decrease of USD 21 /mt, compared to last week. It seems that the government is
lowering DRI price to USD 343 /mt and billet to USD 529/mt. Besides, in the
last tender of Khuzestan steel co, billet was heard USD 560/mt fob, so no price
increase is expected from the supply side. It seems that the government is
insisting on price floor at IME and imposing it to the spot market.
Of course, these
policies are experienced in other commodities and the result is clear. The
first effect is that producers will withdraw from the stock market and turn to
the non-stock market, and if further resistance by government, they will stop
But there are two
phenomena cited by the market affecting demand side. First, power outages that
will directly affect billet production and reduce supply level, small producers
who are a kind of market regulator would be most affected by this process.
Another issue that
affects the market would be opening of Chinese market. With the opening of Chinese
market, transactions will be activated not only in China but also in other Asian
markets from Singapore to Indonesia. Naturally, CIS billet price, which is a
basis for pricing at IME, will rise.
The third issue that
affects the steel market is the political issues ahead and its impact on the
exchange rate. Higher ex-rate will increase profit margins of mills, which in
turn will change price of rebar. Any forced decline in prices will somehow
neutralized by reducing supply of mills at IME.
CBI weekly average ex-rate for Steel
Products (SANA): Rials 242,024/ 1USD
06 June 2022
Iran Steel News Bulletin