Billet
Billet price was
upward during last week in Iran domestic market. The reason was higher ex-rate and
limited billet supply due to power outages. Anticipation of limited supply at
IME made re-rollers anxious about buying more which led to an increase in price
of billet from USD 650/mt to USD 652/mt ex-work including VAT.
Long
Products
Billet upward trend
made rebar price also up during last week in Iran from USD 706/mt to USD 716/mt
ex-work including VAT.
I-beam was also
upward as billet supply level was limited from USD 716/mt to USD 718/mt.
Flat
Products
Price of two mm HRC ex-work Mobarakeh was USD 1072 /mt on last Monday,
which reached USD 1056/mt by Wednesday. Mobarakeh Steel co 3 to 15 mm thickness
HRC had a steady trend. Prices fell in the first three days of the week, but
with the possibility of power outages at the production lines and reduced
production, market sentiment changed.
Oxin co HRP started the week downward but news about power outages made the
market up from USD 1230/mt to USD 1237/mt. Kavian co HRP was unchanged at
around USD 1061/mt.
As power outages has made CRC demand lower in consuming parts, Its price
declined a little from USD 1263 /mt to USD 1262/mt ex-work including VAT. HDG
market didn’t change.
Weekly Analysis:
In any economy, no
matter what economic ideology it is following, When economic equilibrium is at
danger for any reason, such as a pandemic , war or a flood, governments pursue
policies to put less pressure on the whole body of economy in short term and on
the other hand, the crisis should be resolved in the shortest possible time.
Last week, the Ministry of Energy shocked two main sections of the economy;
industry and construction, by cutting off electricity to steel mills and cement
production units to save more power for household usage but its consequences
are not simply reparable.
1- With the power
outages, DRI producers are forced to cut their production level because it is
not possible to store DRI.
2- Since billet
production is facing a great decline due to power outages, DRI producers would return
to export market to compensate lower domestic demand. As delivery of export cargoes
takes 45 to 60 days, in the next two months, when the electricity problem has been
diminished, DRI mills won’t have enough inventory to offer in domestic market.
3- By stoppage of
billet production, long products prices will increase and this will lead to
further stagnation of the market.
Once the electricity
problem is solved, billet producers will return to DRI and scrap market, which
will limit their supply level and increase prices. Therefore, billet price will
not fall because its cost price is high and rebar price won’t decline easily in
the next two months.
4- On the other
hand, higher DRI price will increase demand for iron ore pellet and concentrate
at IME and will increase their prices. Price of minerals unlike finished
products will not decrease easily and quickly.
Due to rising raw
material prices, it is not simply possible to return to today's prices. The
longer the power outage period, the greater the depth of the catastrophe,
because in addition to not producing, the mills must fulfill their heavy
obligations to the government and the banks.
The
"imbalance" created is a danger for production and employment. Its
effects will be known in the coming months.
CBI
weekly average ex-rate for Steel Products (SANA): Rials 220,605 USD
12 Jul
2021
IFNAA.IR