Iran Steel Market Trend in Week 49th, 2013

Billet

Billet price was downward during last week in Iran as expected. Billet size 150 mm was down by USD12/mt to USD641 /mt on truck in Anzali including 6% VAT and custom duty by end of the week. Domestic production size 120 mm was transacted at up to USD601 /mt ex-work including 6% VAT .

Billet market will continue downward trend as:

1- Import level has increased. During first 12 days of current Iranian month ( from 22 November till 03 December) more than 23,000 tones of billet have been imported to Iran which is expected to increase to more than 40,000 tones till 20^th December. This is despite downward trend of previous 7 months as it had reached just lowest record of 16,130 tones during last Iranian month.

2- Downward price of steel scrap in Iran which has dropped from USD524/mt to USD464 /mt . Scrap market is quiet and many billet producers prefer using pig iron at the moment as it is cheaper than scrap and more usable.

3- Downward price of long products which continue with lower demand level. It is expected that debar price diameter 14-25 mm reach lower than USD685 /mt ex-work including 6% VAT. If so, billet price should be around USD605/mt.

At the moment imported billet price is around USD520-525/mt cfr Anzali. After custom duties with ex-rate of USD1/Rials25,000 cost price for imported billet is not more than USD572 /mt but problems like opening LC and other costs has made it around USD 605/mt .

When sanctions against Iran decrease, Iranian traders will cost lower for importing billet, so its price will drop. As a result traders are trying to get rid of their billet stocks. This higher availability in the market is making price more downward.

Long products

Long products market was downward during last week in Iran. By Sunday, prices dropped by USD4-8/mt which made some buyers interested in dealing but as the downward trend continued, many buyers stopped trading again hoping for more drops. One of the producers offered debar at USD657 /mt to be offered this Monday at IME, but market participants expect base price to reach USD645 /mt  ex-work excluding VAT or lower.

As demand level is scarce and prices are downward, debar price at USD 665 /mt including 6% VAT is not impossible. But mills are trying to resist against declines in prices.

During last year around 40% of traditional steel market participants in Iran were disappeared. With current situation this number may increase more. They may put their money in Iran Stock exchange market or other sectors. Final result would make Iran steel market which needs high liquidity, alone with very limited demand level and a broken traditional market. When steel mills are in trouble, it will affect banks operations as mills will have difficulty in repaying loans. Iran steel market is in need of government plan at this situation to find a way for more cooperation of manufacturing section and steel market.

Flat products

Flat products market was downward during last week in Iran. Price of 2 mm thickness HRC dropped by USD8/mt to USD746/mt on truck in Anzali including 6% VAT. Price of HRC thickness 2.5-15 mm from domestic producer dropped by USD8/mt and there was no demand for it. HRP price also dropped by USD12 /mt to around USD730 /mt ex-work including 6% VAT.

At the situation that demand level is low foreign suppliers like Indians and Koreans are increasing flat products export level to Iran at interesting prices, this will make domestic market prices more downward. Korean HRC was priced at USD726 /mt including 6% VAT and custom duty in Southern port of Imam Khomeini during last week.

Iran CRC market was quiet and downward. CRC import level has increased recently to around 40,000 tones during last Iranian month. As domestic leader producer of CRC, Mobarakeh Steel Complex has decreased supply level, higher import is expected. Monopolistic policy of this producer has ended in higher import level as many traders prefer buying from import market when prices rise in domestic market.

HDG market is facing low supply level but limited demand made prices downward. Higher import level of CRC and declines in price of CRC will affect HDG market in coming weeks.