The rebar market has been inflamed since earlier this year. Then we witnessed the unjustifiable growth trend of the price of long steel sections in the commodity exchanges and the free market.
But for several days now, this growing trend has stopped and even taken a downward path. Undoubtedly, a significant part of this price decline should be attributed to the cessation of the upward trend of the dollar rate and its entry into the downtrend channel. Such unrealistic fluctuations cause irreparable damage to the country’s industries. It seems that in recent months, despite the growth of steel production, its exports have decreased. It is as if prices are so high in the domestic market that producers are reluctant to sell in the global market. Meanwhile, steel production in the country is far higher than real steel demand; Therefore, the export of these products should not be reduced in any way, because in the long run, it will provide the ground for a decline in production for these industries.
*** The desire to buy steel waned
Bahador Ihramian, vice president of the Iranian Steel Producers Association, said in an interview with Silence that the devaluation of the dollar against the rial was the main reason for the decline in steel and steel products, adding: Found. Many people bought steel and invested in this market in order to preserve the value of their money. This also paved the way for the unjustifiable growth of steel products. Ehramian said: “But with the exchange rate stabilizing and even decreasing, the price of steel also went down; In other words, the desire of buyers to invest in this product decreased. In such circumstances, we saw price adjustments.
This trend is not limited to the rebar market, that is, it has become a pervasive trend in our country’s economy that has also spread to the steel market. The vice-president of the Association of Steel Producers further noted: “From the above-mentioned cases, it is understood that the price increase was not due to real demand; Therefore, the presence of traders in this market has been tangible. Rising prices have nothing to do with real demand, and only the actions of profiteers have fueled inflammation.
*** Supply of steel and steel products
He added: “The supply of steel and steel products in the period when prices have fallen, has not changed much compared to the past; Therefore, the change in supply conditions can not be cited as a reason for lower prices. In some cases, there is not even a purchase for some offers. Under such circumstances, it is natural for prices to fall.
In the end, Ihramian said: “Currently, market demand is limited to consumption demand; That is, there is no longer a demand for investment. The continuation of the rebar market trend also depends on the exchange rate. If the exchange rate is bullish, steel prices will rise again. Of course, if the dollar does not rise, we should continue to see a decline in hardware prices. At first glance, such a quick impression may not be true, but the Iranian economy has accepted this approach. Undoubtedly, such inflammations are to the detriment of the producers the most, and even the producers are looking for price stability more than the consumers.
*** Real sales, guarantee of production continuity
Reza Jourabchi, one of the producers of steel products, said in an interview with Samat and explained the reasons for the decline in the price of steel and steel products in the past few days: “Stopping the growing trend of the dollar and its downward trend is one of the most important reasons Provided steel.
Another reason is that the market is saturated with steel products. In the first months of this year, on the one hand, steel production increased and on the other hand, exports of these products decreased. Meanwhile, there is no demand for domestic steel consumption, given the recession that has overshadowed the construction market. In such a situation, the warehouse of producers and traders is almost full.
He added: “In recent months, the growing trend of steel prices has been such that the prices of steel products have exceeded its export rates.” In such circumstances, the tendency to export by producers decreases, but it should be noted that the amount of steel production in our country is much higher than domestic demand; That is, export is the key to the sustainability of this industry and the continuation of its production. Therefore, the price of these products should be corrected and the selling rate in the domestic market should be equal to the export prices. Otherwise, the production units will be closed. In fact, the final product must be marketed to the real consumer market. Of course, traders buy steel products to some extent in order to preserve the value of their money, but this market does not have a regular customer without consumption.
*** The influx of liquidity, the growth factor
The rebar market activist further noted that the upward trend in steel prices and related products increased in the direction of currency exchange rate growth. As in recent months, we have witnessed significant growth in exchange rates, coins, gold, cars, housing, and so on. This growth was created following the growth of the dollar exchange rate against the rial and people’s fear that their investments would become worthless.
That is, a considerable amount of liquidity rushed to the purchase of goods. Under such circumstances, steel products were also bought in the form of capital goods and their sales rate increased significantly.
As the demand for steel products, although non-consumable, increased, so did the production units. Demand for these products was growing, prices rose in the chain of competition; That is, as the manufacturer raised the price of its products, there was still a demand for it.
Of course, this price increase did not end the chain. In such cases, raw material producers and owners of semi-finished products are also affected
Growth, raised the price of their products; In other words, this inflation was extended to raw materials and upstream industries. As a result of the psychological atmosphere caused by the growth of the dollar and the devaluation of the national currency, the prices of iron and steel, like other products, increased.
In such a situation, the owners of liquidity find a double desire to turn their money into a commodity.
*** Rumors control the market
“In such circumstances, the lack of a consumer market and the publication of political news will pave the way for this upward trend,” Jourabchi said. Now, if prices fall slightly, iron and steel owners will start buying purchased products for fear of losing out. And this intensifies the downward trend in prices.
In such a situation, traders sell below and negative competition begins, which hurts the producers the most. Because a businessman who, for example, bought a rebar for 8,000 Tomans per kilo, now that its price has reached 11,000 Tomans, sells this product for 10,900 Tomans and makes a significant profit from it.
But as prices rise, the producer is forced to buy raw materials at a higher price, so it suffers greatly in such a situation. In this situation, factories also have to reduce the price of their products in order to have buyers and the possibility of continuing their activities. This trend will continue until the dollar declines or the sense of fear that exists among rebar market participants disappears.
*** Predicting the price trend of steel products
Regarding the forecast of the price trend of steel products, he said: “The price trend strongly depends on the psychological atmosphere prevailing in the market and the price of currency.” Currently, there are several forecasts for the dollar exchange rate. On the one hand, there is talk of the growth of the dollar to 30,000 tomans, and on the other hand, there are rumors about Iran’s agreement with the international community and economic openings. In fact, the current rebar market trend depends on rumors. As each rumor gets closer to reality, the market path becomes clearer.
But what is certain is that the prices of steel products must reach world prices. Buy steel products to reach its real consumption. Excess production should also be exported. The mentioned solution is the only way for industries with maximum capacity to operate. Otherwise, many steel mills and related products will have to cut production and even adjust their labor.
*** Concluding remarks
The Commodity Exchange is then expected to meet its obligations. Steel ingots are offered at expert price and based on international rates. The final products should be sent to this market based on the price of ingots, taking into account the cost and reasonable profit. Under such circumstances, this economic cycle returns to its right path.
In the last week, the prices of steel sections have entered a downward channel, because on the one hand, prices are in a downward trend, and on the other hand, the supply of these products is far higher than the real demand for them. In fact, these cases can control this market, however, there is still concern about the future, because the economic situation of the country is facing instability and in such circumstances, the continuation of this trend can not be assured.
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