Recently, the issue of steel rents in the country has been discussed in the industrial and mining councils of the country. Recently, it was heard that the secretary of the Association of Steel Producers has estimated the value of energy rent in the steel chain up to twice the country’s subsidy budget. What are the benefits of spending this money in the right and main way for the industry and the economy of the country. This issue is the pretext of the analytical note of Artan Press news magazine and in the following we will deal with the most important factors of rent creation and its expansion in the steel industry. We suggest you do not miss this note.
*** Lack of coherence and integration in the amount and manner of steel supply
The most important problem of the steel sector, which is rent-seeking, is the issue of incoherence and integration in the amount and manner of steel supply in the country. شد. In a situation where prices are unbalanced, we are witnessing astronomical and bubble growth in prices that both buyers and sellers are aware of, and this will be to the detriment of producers and consumers because the revenue from price increases in an off-road direction. Normal trades will be absorbed.
Another major problem that has emerged as a wound in Iran’s steel economy is the issue of monopoly and taste restrictions on supply and demand. One of the most obvious examples of this is the discussion of mapping transactions in the steel industry. Upstream steel market players are limited, in which case there should be a tool to manage monopoly power. Policy-making, for example, is done by one or two large steel companies, and these companies have been observed to disrupt the pricing process. As long as this situation continues, it is practically impossible to expect rents to disappear from the steel market.
*** Transparency in the production chain
In the steelmaking chain, the more we move from top to bottom, the less the monopoly decreases. For example, in the production of ingots, the first few companies are almost all markets; But when it comes to rebar, the number of companies reaches close to a hundred. Intermediate steel chain products are offered on the Commodity Exchange; If the whole chain is listed on the Commodity Exchange, it will definitely achieve transparency in the production chain.
Unfortunately, in the steel market, there is no clear and first-hand information, and at the beginning of trading, only news is heard. Also, the buying and selling route and trading are not done in a transparent context, and the current trading situation has many challenges. The big problem of the steel market in this sector is the lack of accurate information. Even the simplest information, such as the amount of production or exports of companies, is not available, and most statistics are estimated or maximally self-reported. In some cases, even the major buyers and sellers in the commodity exchange are not known, and this is a wake-up call for exchange transparency and the creation of opportunities for steel rents.
Unfortunately, performance appraisal and tracking systems in the steel sector have not worked as well as they should have. In this regard, it should be announced that the optimization system of the Ministry of Silence has shortcomings; This system is more active in the petrochemical group and is weak in the steel market. We hope that transparency will be established in the field of steel as it was implemented in the petrochemical field, in order to enable the organization of this market.
*** Why should rent be given to steel companies?
Another issue that should be noted about steel rents is the issue of large and cheap energy rents that are provided to these companies. The story is that this rent is first given to the steelmakers and taken back during the sale. Now the question is why this rent should be given to the steel companies? Basically, why do we have to pay rent for steel and fuel to get it back at the time of sale? Why is this rent paid at all?
The Commodity Exchange is in charge of pricing and the Ministry of Silence is in charge of supply and demand. Commodity exchanges are the trading platform and price regulator. According to Article 18 of the Law on the Development of New Financial Instruments, goods offered on the Commodity Exchange are excluded from the scope of mandatory pricing. In steel, even in commodities required to be offered, more than half of the transactions are done off-exchange, so in the field of steel, both the statistics of transactions, the process of regulation and prices are disrupted.
*** But what to do with this large volume of rent in the steel market?
But with so much rent in the steel market, what to do? The way to get back this rent is not to disrupt pricing. If the rent is given to the upstream company and then we want to deliver it to the consumer through pricing, the profit from the production sector goes directly to the pockets of non-productive factors. In fact, the rent goes to other people who have not played a role in production, and this rent will eventually reach a few large grains.
When the steel standard was announced, the price on the board was the same as the approved formula, but the problem is that if the recession deepens or the boom returns to the market, how can this communicative formula be maintained? The base rate was set, but the communiqué was enforced anyway.
One issue that gives new life to the issue of rents is the issue of instability in base prices in the stock market. Due to the fact that the currency has been increasing over the past few days and the demand in the market increased again and with it the global rates, the issue of lowering the base price was raised again, which was not justified and was against the resolution. At certain points in time, we will see a huge flood of rents in the market for some opportunists.
*** Expensive factor of limited supply steel is a stock exchange
The Market Regulation Headquarters is a sub-agency and coordinating body that should have a position in the government, but has now become a sub-ministerial committee that completely shapes the form of its decisions, and this position needs to be reformed. Issues in the steel chain must be managed, and the concern of all steel managers is that if there is a rent, it must reach the people.
The reason for the high price of steel is the limited supply on the stock exchange. The way to get steel rents back is through taxes, not cheap sales. Our main problem is that the steels do not have enough supply in the commodity exchange, and if this supply is done, the price will definitely be balanced. The total production of the country in the field of steel products is about 30 million tons and domestic demand is about 15 million tons; Therefore, the main emphasis for the optimal regulation of the steel market is that the Ministry of Silence should regulate the market of steel products by providing the preconditions for increasing the supply in the commodity exchange, and not by entering the pricing process unilaterally.
*** Problems in managing the economy and the internal market
The fact is that no matter how deep we go into the recessionary market affected by the optimism of the revival of Borjam; The end of the gradual loss of hope of this optimism from the return of the two sides to Borjam will unfortunately have far worse consequences for the Iranian economy than before; Some very hopefully stated that as soon as Biden came to power, he would issue an order to return to Burjam; What happened now ?! The fact is that the United States is the backyard and slave of the ring to the Zionist lobby, and Zionism is Iran’s number one enemy.
Our problem must be at least in the management of the economy and the internal market; It should be solved radically and independently of the US dollar, not by connecting and looking at the daily exchange rate board of the central bank and leading the public opinion to reduce the export rate or the exchange rate and the desire of Barjami in the conditions of sanctions.
If our domestic market gets rid of some small and large rent-seeking stones in different areas of the country; Definitely this once and for all solution to the evil of dollar fluctuations, at least directly; From the domestic market, our products will decrease, and there will be no more news of rents between different layers of the steel production chain.
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