Iran’s steel market has witnessed wide fluctuations in recent months that less than a day this atmosphere prevails in the steel exchange market and we have not seen these scenarios before.
The free market price rent had nothing to do with the prices on the commodity exchange, and to this extent the real consumer and the people at the end of the supply chain had not been able to buy it. Therefore, in this analysis, we try to evaluate the most important factors affecting the performance of the four-month domestic steel and iron exchange.
In the Commodity Exchange during the last sixty days, there was an unexpected price difference between the Commodity Exchange and the free market price, which further affected the turmoil in this market and complicated the process. Most of the opacities in the market in the long sections and slabs It so happened that last month the black sheet was traded at around 12500 Tomans in the commodity exchange and on the same day the free market took different conditions and the black sheet was sold at the price of 22500 Tomans in the open market. This large difference in the prices approved by the Commodity Exchange and the open market has greatly rented the space and has increased the uncertainties in Iran’s steel transactions to its maximum.
*** The need to stop matching transactions on the steel exchange
One of the complications in the Iranian steel market in the current situation is the supply of steel products and products in the form of machining. In the explanation of matching, it should be said that the matching system provides the possibility of buying steel products from surplus goods in the commodity exchange. Steel matching occurs in a situation in which all products offered in the commodity exchange are not sold and the rest are traded at base price. The non-supply trading system is located and sold. Meanwhile, the supplier of steel products in the commodity exchange is obliged to keep the matching system open until the end of the trading day.
This causes no competition between suppliers and base prices limit the competitive space of supply and demand, and base prices in the matchmaking system provide space to create a free market in the coming days.
Therefore, one of the factors that caused the difference between the free market price and the commodity exchange in the last two months as a major challenge was the cross-sectional supply of products in the base price matching system, which to meet this issue, various meetings by organizations It is held upstream and the market is waiting for the decisions and the outcome of these meetings. Evaluations and pathologies performed by experts in the steel exchange show that the elimination of matching transactions takes up to six months and the replacement of offers should be done gradually in the commodity exchange to balance the market and reduce rents. Available in the open market.
*** Growth of false demand in the steel exchange
Inflammations in steel prices over the past two months have made the market attractive to volatile traders, especially those who specialize in speculation. Since any commodity that has a capital aspect and is not part of perishable items has the potential to grow and create false cross-sectional demand. The same is true for steel, and we have seen growth in demand over long periods and steel ingots on the stock exchange and free market transactions. Iranian steel has over 15 million tons of production in excess of domestic demand, and Iranian steel production has grown over the past year. It has experienced 11 percent, which is very significant in the context of the corona and the decline in global demand.
*** Iran Steel Exchange is witnessing demand growth?
In the reports of the analytical site World Steel, it is quite clear that most of the steel producing countries have been associated with reduced production and supply. For example, the CIS countries have reduced production by about 6 percent. But the question arises that despite the decline in production and subsequent global demand, the Iranian Steel Exchange is witnessing growth in demand? The answer to this question is the influx of stray capital into the steel market, which has caused excitement and inflammation over the past two months.
Depreciation of the national currency, uncertainty about investing in gold and dollars, fragility of prices in cars and sometimes the unattainability of some cars and low value of some domestic and foreign car brands, heavy and stagnant transactions in the housing market, uncertainty about the trend The movement of the Tehran Stock Exchange index and, most importantly, the ban on the export of steel products have all led to the introduction of steel as a commodity of capital in Iran and to attract part of the liquidity of society. This can be a very good opportunity in a stable market, but in a situation where the purchasing power of the final consumer is at a minimum, this issue, along with all the advantages it has for the steel exchange, can be challenging and harmful.
*** Damages of steel withdrawal from the commodity exchange
One of the factors that influenced the inflammation and excitement of the steel exchange was the rumors about the withdrawal of steel transactions from the commodity exchange. This news was published with many rumors and different models and was sometimes denied at different times. Bubbling. If this news were true, we would have seen the growth of prices much more than the current one, because the steel exchange was becoming a free market exchange, and prices and indices did not follow any logical trend, and on the other hand, because the investor power in the exchange Steel is very bold, eventually the steel price policy fell by the major shareholders and investors in the field and the work became very difficult for the consumer and the applicant.
*** The impact of the dollar exchange rate on steel exchange transactions
Over the past quarter, the prices of steel sections have been greatly affected by the price of the dollar. Although the effect of the dollar price on the commodity exchange did not have the same effect on all sections, but the conformity of the dollar rate and the price of width Steel products in the commodity exchange have gone through a logical process.
Since the exchange rate of the dollar and the exchange rate of steel and iron are interdependent due to energy carriers, we saw a sharp increase in the prices of steel ingots and long sections by changing the exchange rate of the dollar and crossing the $ 24,000 channel.
*** The first role of the dollar in stock market pricing
The price of the dollar has had its effect on the final prices of products offered on the commodity exchange since the last quarter, and its effect on the prices has remained almost stable over the last sixty days. During the past month, with the temporary decrease of the dollar price, we were happy with the decreasing trend in rebar transactions, which, of course, with the re-peak of the dollar rate, the prices have stabilized in the channel of 110,000 Rials. A possible scenario in the rebar market would be a decrease in the dollar exchange rate and, consequently, a decrease in the rebar rate of 20 in futures trading on the Commodity Exchange.
The behavior of the dollar regarding the price of ingots was not dissimilar to Isfahan rebar and both reacted with a cross-sectional decrease in the dollar rate and the final price of both products decreased cross-sectionally but returned to the upward channel.
In general, the behavior of the dollar and the entry of smart money into the iron and steel market in the coming weeks and after the holidays on Thursdays and Fridays should be examined. If demand weakens due to the growth of the dollar, we will see cross-sectional price increases in steel products and the iron market, but it is expected to see more competitive prices in the steel and iron exchange in the medium term by adjusting the exchange rate.
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