The Industries and Mines Commission has proposed a plan for sustainable development and production of the steel chain to the Islamic Consultative Assembly.
*** Report of the Industries and Mines Commission in the parliament
The detailed report of the Industries and Mines Commission in the implementation of Note (1) of Article (45) of the Internal Regulations of the Islamic Consultative Assembly on the subject of examining the steel market is as follows:
The development of the steel industry in the world is one of the important indicators of countries being industrial. China is currently the largest producer (53%) and consumer (51%) of steel in the world and plays a key role in the global steel market. Iran is also the tenth largest steel producer in the world. So that in 1398 it produced more than 27 million tons of steel and according to forecasts, this amount will reach more than 30 million tons in 1399. Access to Iran’s vast gas resources has also made it the world’s largest producer of gas-based sponge iron.
According to the horizon of 1404 of the Islamic Republic of Iran, the steel production capacity of this country should reach 55 million tons. From 1392 to 1398, crude steel production in Iran is associated with an average annual growth of 9% and with the activation of the capacities of different links in the country’s steel chain, in addition to meeting domestic needs, there is also the possibility of steel exports. Chain products are offered to other countries. In 1398, the total export of the steel chain in terms of weight was 25 million tons and in terms of value was 4.9 billion dollars. The steel chain accounts for about 12 percent of the country’s non-oil exports. It is worth mentioning that the main exports of iron ore, concentrate and pellets to China and the main exports of steel products to Southeast Asia, Iraq and Afghanistan.
*** Steel chain troubles
A study of steel consumption in Iran shows that the apparent steel consumption in 1398 was in the range of 15-16 million tons. Unofficial estimates, meanwhile, put the country’s actual steel consumption at 12 to 14 million tonnes. Taking into account the macroeconomic indicators of the country, the conditions of sanctions and the prevalence of coronavirus, it is predicted that in 1399, in the most optimistic case, the amount of steel consumption in the country will be the same as 1398, so, while meeting sustainable domestic needs, attention Export is one of the requirements for balanced development of the steel chain in the country.
Iran’s steel chain faces several challenges. Examples of structural challenges of this chain can be the imbalance of the chain, ambiguity in the implementation of development plans of the steel industry, backwardness in the field of mineral exploration and the challenge of raw material supply, lack of infrastructure (water supply, ports, railways, etc.), He pointed out the flawed structure of energy carrier pricing, low productivity, lack of attention to technology upgrades and lack of comprehensive statistical and information systems in the steel chain. For example, based on the capacities created in the country as well as practical plans in 1404, the chain The country’s steel will face the challenge of supplying iron ore, concentrate, pellets and sponge iron, which are more worrying than the deficit of other chains.
*** The most important challenge of the steel chain
The most important challenge of the steel chain is regulating the country’s steel market. Given the conditions of sanctions and exchange rate fluctuations in recent years, the government has made extensive interventions to regulate the country’s steel market. Government intervention to regulate the steel market has been mainly through the market regulation headquarters and the issuance of various letters and instructions that the set of government market regulation policies has not been in favor of the final consumers of goods (people) and has caused rent, corruption and prosperity.
Government price intervention policies in the market of steel chain products have created a significant price gap between domestic and global prices, which along with the devaluation of the rial has increased the attractiveness of exports. The growth of exports of various steel chain products, along with the reduction of domestic supply, led the government to control exports and impose export duties on minerals and metals. The following measures (which are mainly contrary to the current laws and regulations of the country and have been implemented with the approval of the Market Regulation Headquarters) have been taken to control prices and maintain the balance of the chain:
*** Measures taken to control prices and maintain chain balance
Pricing of various steel value chain products
The major requirement of large manufacturers to supply ingots and steel products in the commodity exchange in a certain amount,
Establishing various restrictions for the export of units that have not provided the share determined by the government in the commodity exchange (implementation of this clause in different time periods from 1397 until now has not been continuous and regular),
Cancellation of commodity exchange transactions
Export embargo by traders and restrict exports to producers only,
Imposition of 25% export duties for iron ore, concentrate and pellets.
The number of sections and instructions issued by the Market Regulation Headquarters has created countless bureaucracies and ambiguities in the regulation of the steel chain market, and the decisions of current and unprofessional individuals are jeopardizing the future of the industry. An examination of the statistics and information provided by the Commodity Exchange and Customs Company of the Islamic Republic of Iran shows that the issued sections and instructions not only did not lead to the supply of goods in the domestic market and the sustainable supply of chain needs. In some cases, the prices of steel and steel products have reached more than 120% of world prices.
*** Results of research and actions of the Industries and Mines Commission
During its investigation, the Industries and Mines Commission has achieved the following results by holding several monitoring sessions with the government and executive bodies:
Every steel policy and decision-making must involve the entire chain to avoid conflicting policies throughout the chain. One of the problems of the steel chain
In previous years, due to cross-cutting decisions, value added in the chain has been transferred to a part of the chain (for example, steelmaking) and has led to mining companies, concentrated sectors and capital pellets. Investment in this sector should be towards investment in the steel sector, which has led to shortages in parts of the steel chain, which has upset the balance of the chain.
Domestic consumption of steel is much less than the country’s production and in long sections (rebars and beams) about 76% of production and in flat sections (steel sheets) about 80% of production is consumed domestically and the rest is exported. In total, 17% of all steel products and 25% of intermediate products (ingots and slabs) were exported.
In the first four months of 1399, exports of various types of steel sections have decreased significantly. As long as the steel sections are 40%, the flat steel sections are 74%, but the ingots are reduced by only 2%, and given that the ingots along the chain are in the pre-production stage of the steel section products; Raw materials are actually sold.
*** Major part of steel products exports in 1398
Most of the exports of steel products in 1398 are allocated to the export of ingot products, ie 61%, which are low in terms of added value compared to final products.
Since the establishment of the Iran Commodity Exchange, it has been decided to discover the appropriate price of steel products in the Commodity Exchange, therefore, decision-makers at different times through the (former) Ministry of Industry, Market Regulation Headquarters, etc. have tried to find steel products in Offer commodity exchanges and buyers can buy the products they need at a reasonable price. But what has happened now is that some manufacturing companies offer part of their product on the commodity exchange and sell the rest of the product without any transparency in the over-the-counter market.
In many cases, it is assumed that with a minimum supply of products and the use of special methods, a relatively high price is discovered in the commodity exchange for a commodity and the rest of the product is sold at the same OTC exchange price, while if the whole product In the stock market, all buyers could buy the goods they needed at relatively lower prices. As offered in 1998 and 4 months of 1399, 36% of steel sheets, 25% of rebars and beams and 23% of ingots have been offered in the stock exchange.
*** Price difference between free market and stock exchange:
The trend of steel chain prices in the open market and the cost price of the commodity exchange show that there is a big difference between the two markets, so that in some products it reaches more than 50%.
Lack of transparency in the major market segment:
Most steel, along with other non-exchange products such as steel pipes and profiles, industrial windings, colored sheets, sponge iron, iron ore, do not have a transparent market, and as a result there are no statistics or information on how they are in the sources. Formally traded.
Failure to follow the implementation of decisions of decision-making authorities:
A look at the approvals of the Market Regulation Headquarters, especially since the beginning of 1397, shows that many decisions have been made about the market of steel products at different times. Unfortunately, for unknown reasons, most of these decisions have been changed many times and no follow-up has been done to implement them. This lack of follow-up has led to the fact that steel market activists have not heeded the approvals of the Market Regulation Headquarters and the Ministry of Silence, and have fueled market inflammation.
Wrong quotas in Ministry of Silence systems, including Optimizer:
Based on the available evidence, corporate quotas are not currently determined based on the reality of the companies, and for this reason, many companies sell their quotas on the black market after receiving them, which has brought huge profits to some. Is. In contrast, real manufacturing companies procure their raw materials from the black market at prices much higher than official prices.
Failure to address violations:
Almost all violations committed in the steel market, including non-supply of products, overselling, intermediation in steel products, have not been dealt with decisively, and this has led to the spread of violations.
*** Summary of the issue and proposal of the Industries and Mines Commission
Industries and Mines Commission with the approach of reforming market regulation policies to achieve the goals:
Industrial development and investment in the country’s steel chain products
Sustainable production and capital management in the steel chain with greater efficiency
Eliminate price fluctuations of steel products at the end of the chain and create balance in the domestic market
Creating equal prices for products on the stock exchange and eliminating rents caused by price differences
Continue and increase the export currency of steel products
Providing steel chain products to the final producer / consumer at the most appropriate price by eliminating intermediaries
And in order to:
Complete elimination of mandatory pricing and only determine the price ceiling and floor
Supply of steel chain products in the commodity exchange
See the additional supply in the commodity exchange
Weekly completion of a comprehensive warehouse system by the manufacturer
Facilitate the conditions of purchase from the commodity exchange
The plan of sustainable development and production of steel chain is proposed and presented as follows:
Sustainable development and steel chain production program with market regulation policy reform approach
*** Supply rules for steel chain products
Article 1- All steel chain products, in compliance with the provisions of paragraph c of Article 36 of the Law of Permanent Regulations of the country approved on 11/10/1695, need to be offered and sold in the stock exchange. Trade of the above products in Off-exchange is prohibited and off-grid.
Note 1- In transactions of steel chain products including iron ore, concentrate, pellets, iron and crude steel and steel sheets, the Iran Commodity Exchange Organization is obliged to allow the registration of production factories with an optimization code and based on the quota in Give the system optimization. Order and buy. The sale of raw materials and products purchased from the commodity exchange is prohibited by buyers, and violators are reported to the judicial authorities due to market disruption.
Note 2- The Ministry of Industry, Mines and Trade is obliged to set a price ceiling for all products of the steel value chain that are offered in the commodity exchange. The price floor and ceiling are set as world price coefficients and can be changed and revised every 6 months.
*** Stock supply regulations
Article 2 – The export of all products from different links in the steel value chain is allowed only after the weekly supply by the producers in the commodity exchange and more than the amount of supply registered in the commodity exchange.
Note 1- In case of exporting to the producer more than the amount of supply in the commodity exchange, the maximum time allowed for the export of goods by the producer for that consignment will be 4 weeks and after this period the export license of the consignment will be revoked.
Note 2: Export of all steel value chain products is allowed only by the manufacturers or their official representatives.
Note 3- The tax exemption for the export of crude steel chain products (iron ore, concentrate, pellets, sponge iron and crude steel) shall be removed from the date of entry into force of this law.
*** Export rules of steel supply and distribution chain
Article 3 – All factors of steel supply and distribution chain, including mineral raw materials (iron ore, concentrate, pellets and sponge iron), steel intermediate products (ingots, blooms and slabs), final products including long sections (such as rebars, beams) Etc.) and flat sections (types of steel sheets including hot rolled, cold rolled and coated sheets) and by-products of sheets such as pipes and profiles must record the information of production, sale, import, export and consumption of these and then Confirm or reject their purchase documents by checking compliance.
Note 1- The sale of goods subject to this decree is allowed only to members of the supply chain whose specifications have been registered and approved in the comprehensive trade system. Buyers are also required to purchase goods subject to this regulation only from members of the supply chain whose specifications are registered and approved in the comprehensive trading system. Until the purchase is confirmed, the sales history will be ineffective.
Note 2- The members of the supply chain and the custodians of the goods warehouses subject to this decree are obliged to register the information of the places where the goods are stored, announce the initial inventory of the goods and register the entry and exit of goods in the comprehensive warehouse system. This is possible for supply chain members through a comprehensive trading system.
*** Punishment of violators
Note 3- Failure to comply with the provisions of this decree in whole or in part is subject to the guarantee of the implementation of Note 4 of Article 18 of the Law on Combating Commodity and Currency Smuggling approved in 1392.
Note 4- Activists located in free zones and special economic zones are also subject to this article and must register their information in the comprehensive trade system.
Article 4- The executive regulations of this law shall be prepared by the Ministry of Industry, Mines and Trade within one month after the entry into force of the law and shall be approved by the Council of Ministers. Violators of this article will be sentenced to dismissal.
Article 5: The Ministry of Industry, Mines and Trade is obliged to send a comprehensive report on the review and supervision of the steel value chain to the Industries and Mines Commission of the Islamic Consultative Assembly on a monthly basis.
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