Steel pricing rules are an issue that has been debated for the past two weeks by metal and steel councils, which some see as contrary to the larger goals of the steel industry, while others see it as an opportunity that could Help make the price of steel more realistic in the domestic market. In this memo, we will discuss the challenges and opportunities of the steel pricing method. Please be with Artan Press.
*** Review and amendment of “Steel Chain Supply and Demand Management Methodology”
The second meeting of the Vice President for Economic Chain with the stakeholders of the steel chain to review and amend the “Method of organizing the supply and demand of the steel chain” has been a hotly debated by analysts and activists in the field of steel and other commodities. Ambiguities, considering the special mechanism for induction steelmakers as well as considering the exporters’ export plans are discussed.
In this instruction, the issue of steel exports is mentioned the most and all members and policy makers of the new policy have placed great emphasis on the issue of growth and strengthening of the country’s steel exports, which is a place of hope for reforming pricing methods and steel production programs. Unfortunately, in the previous meeting, the participants did not reach a consensus on steel chain policy, which was postponed to the next meetings.
Due to the ambiguities and different interpretations and summarizing the opinions of the participants, no results were achieved and the decision was postponed to another time. In this regard, it was decided that in the working group approved in the previous meeting, the executive instructions of this method should be compiled within a week with the aim of resolving ambiguities, considering the export programs and obligations of factories, and counting exceptions.
*** Production of induction steel; The main topic of the style sheet
Determining the status of induction steelmakers is one of the main issues in the steel market. Recently, due to the increase in the production of induction products, the costs for these factories have risen sharply, which has had a severe impact on the export of these products. Therefore, one of the main topics of the steel market regulation meeting was dedicated to issues related to induction steel production. In the case of induction steelmakers, it was decided to find a solution to their problems in a committee with the focus on the Ministry of Silence and with the participation of the Steel Association and Commodity Exchange, according to their special situation in the scale of production, supply of raw materials and sales markets.
Since the meetings related to the regulation of the steel market are accompanied by urgent minutes to be implemented. In this meeting, it was suggested that time intervals be considered for fulfilling the obligations of steelmakers. In addition, the challenge of steelmakers’ export commitments for the coming months was also discussed, and it was decided that the executive instructions of the method should be formulated in such a way that these commitments are taken into account.
*** The effect of commodity exchange transactions on the prices of steel market regulation procedures
Since many pricing in commodity exchanges is based on the daily rate of ingot prices. Attention to this part of the market strongly affects the prices of steel market regulation methods. The market is designed with the assumption that the pricing process is planned based on equilibrium prices in the previous day’s supply and demand. The Steel Market Regulation Code has rules such as commodity exchanges and follows the rules prohibiting the suspension and opening of the purchase ceiling.
If the ingots offered do not have a buyer for three consecutive weeks, the base price will be reduced by 5%. However, if this clause of the Code is to be interpreted in such a way that the base price of the Commodity Exchange receives 75% instead of 80% CIS Again, the sharp rise in prices of CIS steel products these days, and of course the possibility of a slight increase in the dollar rate in the next three weeks, will still not allow the base price of ingots to fall favorably.
*** The effects of the half dollar price on the style sheet
Given the recent fluctuations in the dollar exchange rate in the market and the rise in the exchange rate, it is likely that in the coming days we will see an increase in prices in the commodity market, especially the steel exchange. The implementation of this policy on the first day is very noticeable due to the growth prospects of the Nimai dollar in the future and its impact on CIS steel prices. To control the current situation, measures should be taken, for example, according to the CIS rate policy, instead of the week before the release, the last week of the month before the release should be considered, in which case the growth of the dollar rate will prevent the reduction of base prices. will be.
*** Implement this policy based on half dollar pricing
In practice, with the implementation of this policy based on half-dollar pricing, the market control policy has entered a closed phase, which has led to the exponential growth of prices. The subject of consideration is the exponential movement of markets in a completely asymmetric manner in different periods. For example, by controlling the exchange rate, we saw the growth of prices in the stock market and the overall index, which has been accompanied by a sharp decline since August.
Immediately after the stock market’s exponential growth and the beginning of the downturn, the parallel gold and currency markets strengthened and cars and housing reached their maximum point. Now that all the existing markets are in a recession and we are witnessing significant declines in them, it seems that the Commodity Exchange with a focus on steel and mineral group has absorbed its determination for a sharp price growth.
*** New style sheet and price increase
Despite the new methodology, the idea of lowering prices is practically impossible, and we have to see what the government has planned for this issue. This style sheet can be used in the medium term Housing and car prices will rise because the cost of finished goods will be extremely high. As mentioned, the price of steel ingots in the open market is the basis of pricing in 70% of the steel chain, and this leapfrog growth will strongly affect the steel market.
Failure to welcome the ingots offered on the stock exchange, if the sale and purchase of this product in the open market is prohibited, can lead to market lock and eventually rollers will be forced to buy ingots at the same price to supply the raw materials they need and rebar To offer themselves in the commodity exchange with the same methodological prices, in which case the price of rebar in the open market in the next few days or weeks, depending on the percentage of competition in the exchange and the distance between the exchange and the free market to 12 thousand and 500 tomans to 14 thousand Tomans will arrive.
*** The growth of astronomical prices in the steel market was ruled out
Many analysts believe that the growth of astronomical prices in the steel market is ruled out because, assuming an increase in the dollar rate and pricing in a new way and with a new rate of steel ingots, there will be no buying at these rates. Over time, the market will balance with a 5% drop in succession. Assuming this hypothesis is correct, the steel market should be stagnant for at least two months, and consequently the commodity exchange should be stagnant and without a deal. And it will lead to the growth of prices in the whole commodity exchange chain.
Another issue that considers the hypothesis of market lockdown and recession as a factor of equilibrium is rejected because the assumption of this issue is the stability of the exchange rate in the current two months. But unfortunately, we have seen the growth of currency prices in recent days. The political events in the country indicate that the exchange rate will probably grow emotionally in the next few days. Because in the current situation, we are in the transition stages in terms of political negotiations, and every small event can take the predictable process of negotiations out of its normal course.
*** Increase the rate of ribbed rebar
By studying the behavior of the Nayr market, we find that border traders and steel value chain producers have reacted to this price increase and are practically preparing to increase the price of the dollar and consequently increase the price of steel, especially steel ingots. So most of the elements lead us to expect a further increase in the rate of steel sections; In today’s transactions, the pricing process took place with the announcement of the second and third prices, and in total, the price of ribbed rebar has increased between 600 and 800 Tomans by most companies compared to the previous day.
Although the steel market regulation policy had to move towards market equilibrium, one issue was added to the complex issues of the commodity exchange, and in practice we saw that many manufacturers refused to offer instant and daily prices.
*** Failure to announce the final price of steel products
The issue of not announcing the final price was not focused on the field of rebar and steel ingots. In today’s market, manufacturers of angles and studs have not announced the prices of their products today, and most of the sellers of kilogram beams have increased their prices between 650 to 900 Tomans. Indicates in high consumption sizes. This is likely to be the beginning of rising prices for steel sections. A market in which the end consumer will be most pressured in the current situation.
*** Pricing of steel products based on the half dollar rate
It seems that the pricing of steel products based on the daily and weekly half dollar exchange rate is a challenge that challenges the market in the current situation. For about two years, the price of Nimai dollar was priced at something close to 4200 Tomans, which was the basis of the price of many goods in the stock market. In the current situation, it is not expected that the half dollar rate will remain the same as 4200 Tomans, because the country’s economy suffered a lot due to this pricing and many rents were created in the market.
But it is not possible to bring the half-dollar exchange rate closer to the free market. The resilience of the traders’ economy is broken and many activists lose their purchasing power and the market will grapple with a new rent. We need to see what arrangements the government and policymakers of Jose Foolad have devised for this challenge. This issue will definitely be raised in the coming days and quick enforcement decisions will be on the agenda. The steel market cannot be left to its own devices.
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