Iran Steel Market Trend in Week 44

Billet

During last week billet price dropped sharply in Iran domestic market. It began the week at Rials19,100,000-19,200,000/mt on truck in Anzali including 5% VAT for size 150 mm but finished the week at Rials17,000,000/mt. Some buyers were bidding at Rials16,800,000/mt.

Downward trend in billet market is due to;

1- TT Ex-rate downward trend, it dropped from Rials 34,460/USD to Rials33,200/USD .

2- Recent high import level of billet.

3- Long products market sadness.

4- Importing billet based on the currencies bought at exchange room which is the main reason behind billet price decline.

Billet supply level has increased in the market as suppliers think that can restock with new cargoes. At the moment billet import price in Iran is up to USD600/mt cfr northern Iranian ports and by using ex-rate of Rials25,250/USD at echange room,final price would be Rials16,500,000/mt after custom duties.

If importers sell billet at Rials 17,000,000/mt, they will have profit margin of up to 3% which is too low as they should pay 135% of total amount of the cargo to the bank before buying. So it is expected that investors go from this market to other sections such as property market or gold.

Billet price dropped sharply during last week in Iran. Its price has almost reached the bottom and if the current situation continues, import level will decline in coming months and domestic producer will suffer too. In domestic market, Khouzestan Steel is offering Rials17,670,000/mt in IME ( Iran Mercantile Exchange) which after 5% VAT, cost price would be Rials18,550,000/mt but import parcels at Imam Khomeini port are available at Rials17,000,000/mt.

 Khouzestan steel have to decrease its billet price to Rials16,000,000-16,100,000/mt for competing with import market or it should decrease production level and wait for a clear trend in the market.  If the mill decreases its billet price, market will face with a big shock. As buyers will stop buying due to concerns about market situation, so downward trend will continue.

Long products

Long products market experienced a depressed week. Debar price dropped by Rials1,300,000/mt, I-beam price dropped by 8% to Rials19,000,000/mt. Prices were decreasing, so buyers stopped transacting. IME is depressed too. Debar was being sold at Rials19,225,000/mt which after costs would be Rials20,200,000/mt ex-work. But another mill sold at Rials 19,500,000/mt ex-work, which means:

Firstly, mills' sale price won't drop more. As import billet price is around Rials17,000,000/mt so debar cost price for the mills won't be lower than Rials19,000,000/mt.It is clear that prices have bottomed.

 Secondly, by decreasing prices, demand level won't rise and will just damage production side.

When demand level drop, traders will decrease purchases from mills. It is about 2 weeks which prices are dropping and seems that buyers will face limitations at IME. If these limitations reduce validity of IME, mills will face bad situation and will have to sell at low prices in retail market.   

Flat products

Flat products prices were downward like other steel products in week 44. HRC 2 mm thickness was priced at Rials21,850,000/mt on truck in Anzali and finished the week at Rials19,000,000/mt including 5% VAT. A reason behind decreasing prices is that many traders has bought cargoes by the currency being allocated from exchange room and now are trying to destock to import more.

HRC 3 -15 mm thickness from Mobarake Steel dropped by Rials 1,500,000/mt for some sizes. Average price was Rials17,500,000/mt.

HRC supply level from Mobarake Steel has been around 2 million tones at IME but demand level is dropping every day. 

CRC price started the week decreasing and dropped by Rials1,000,000/mt to Rials24,000,000/mt at the end of the week. Traders are in the market and supply shortage has stopped. Prices in global markets have bottomed. Low demand and competition among traders has made downward trend faster.