Billet
Billet price was up
by USD 4.5 /mt during last week in Iran domestic market to USD 715/mt ex-work
including 9% VAT. Power outages continued, which resulted in lower supply level.
Besides, higher ex-rate also made billet market upward.
Long
Products
Average rebar price
changed during last week in Iran from USD 777 /mt to USD 784 /mt ex-work
including VAT. Demand was expected to rise but market was quiet and didn’t
change significantly.
I-beam average price
changed from USD 772 /mt to USD 778/mt by end of the week. Actually Esfahan
Steel co was leading the market and insiders expect upward trend in prices in
coming weeks.
Flat
Products
Mobarakeh Steel co
HRC 2 mm thickness was USD 1128/mt on last Monday, which reached USD 1142/mt by
Wednesday.
Oxin co HRP improved
a little from USD 1227/mt to USD 1243/mt. Its demand level is limited but lack
of supply due to power outages also exist. Besides the mill is interested in improving
export level after the problem solved. As warehouses become empty and the mill
is looking to export opportunities, supply - demand condition in the next two
months is not clear because domestic demand is very limited and any price increase
requires at least 3 months.
Kavian co HRP was
unchanged at around USD 1092/mt. The mill together with two other mills are meeting
market needs due to their price gap with Oxin co HRP. In This situation stable
price policy is the best way to increase market share. Stability of slab price at
IME also helped the market sentiment.
Lower supply level
made CRC price upward from USD 1270/mt to USD 1284/mt despite market recession
and closures at the beginning of the week.
Market closure and
demand shortage made HDG almost stable at USD 1326/mt by end of the week. We
have to wait for the market reaction to higher currency rate and HRC upward
trend in coming days.
Weekly Analysis:
Semi-finished steel supply
level has been actually stopped due to power outages in Iran.
In this condition,
as pellet and DRI market inventory is high, continuation of this situation will
reduce production level of these products. The best choice in this regard would
be increasing export level.
Semi-finished steel
production has decreased. Naturally, production of finished products has also
decreased. This drop in production is very heavy and practically means stoppage
of some mills. Of course, prices should go up, but we should not forget that domestic
market steel demand is also not good and does not allow this price improvement
happen easily, so the market is moving towards a price increase with a
recession. The higher the prices, the deeper the recession would be.
This is not the only
effect of power outages. Steel exports have been stopped. Higher export of DRI
or pellet cannot be equal to finished steel export because they have their own
consumers, so two months of steel export currency importing to the country should
be forgotten. That means about USD 2 billion lost in foreign currency, which
takes at least four months to be satisfied again. This would be in a situation
where the global market remains the same.
Suppose power supply
situation returns to the May today. Steel producers have to buy semi- finished
steel. Most of them face severe liquidity constraints and therefore pre-sell
the product. At the same time, they start buying Billet. Billet producers also
have to buy DRI but DRI suppliers are active in export, therefore it will end
in higher prices which will be transferred to finished steel products too.
The result would be
further recession, closure of small mills, lower export level and an increase
in the exchange rate.
Power outages appear
to have accelerated Iran's economic reconstruction. This is a national issue. We
also have problems in cement and petrochemicals. Even if the new president
brings billions of dollars in foreign exchange, he simply cannot heal the
effect of this wound, because by injecting foreign exchange and creating jobs,
demand will increase. Naturally, prices, supply and demand will remain shaky
and unstable in near future.
CBI
weekly average ex-rate for Steel Products (SANA): Rials 221,585 USD
02 Aug
2021
Iran
Steel News Bulletin
IFNAA.IR