Iran’s domestic steel market has faced an unprecedented silence in the demand and final transactions of steel. Whatever the reason for this downturn in the steel market, it was a severe blow to market order and the balance of supply and demand that we saw before the start of the year. Any inflammation that enters the steel market has long affected domestic prices. The continuation of the steel market recession will deal irreparable blows to the price discovery process in the next government commodity exchange. It seems that the future Minister of Silence will experience many challenges in this direction. In the following, we will provide a clear and realistic view of the domestic steel market these days. Please be with Artan Press
*** Steel market downturn; More serious than ever
The steel market can be summed up in one sentence. “A strange silence has overshadowed the steel market.” Traders are accustomed to almost zero trades on the commodity exchange. Many of the products offered last week did not have a single customer. If the purchase is made or hand-picked goods and purity in some banks. Or the consumer was faced with great misfortune and in this inflamed market he had to buy as much as he needed from the commodity exchange in order to sustain the project.
In the past few days, we have seen that the supply offer on the supply side in the market is high, but the demand has completely disappeared from the market, and we are witnessing a kind of fear or perhaps expectation from the stock demand side. The situation of consumer demand, as is obvious to almost everyone, has not changed and no significant changes are expected at the moment.
*** The steel market downturn is the result of policymakers’ inaction
Unfortunately, these days, the Iranian steel market is the result of passivity in the policy-making sector. All the factors that can lead to the growth of steel prices in the domestic market have come together in today’s market conditions and have disrupted the market order with maximum power. Unfortunately, regulators no longer have the incentive to continue. It seems that the government is no longer eager to control the factors affecting the steel market. This has deepened the recession in the steel market.
If we want to enumerate the most important factors of price growth in steel markets, the exchange rate is the most important factor. Unfortunately, the difference between the price of the half dollar and the free market has created the conditions for the creation of rents. On the other hand, due to the questioning of the efforts of the Barjami negotiations, the positive outlook of political relations has been faced with an aura of ambiguity. Continuation of this trend is likely to pose challenges for the new government in the steel sector.
*** Raw material prices rise and market stagnation deepens
Another important issue that has dramatically raised the price of steel in the country is the challenging discussion of raw materials in the country. The slump in the steel market in recent days, if there is an infrastructural reason, is the issue of raw materials. Rising prices of raw materials, especially iron ore and scrap iron, over the past six months have led to uninterrupted prices that are not even affordable for domestic production.
One of the reasons that has kept the market above the price ceiling is the high cost of steel for producers. It is noteworthy that in the context of this pathological situation of the domestic market; Rates from the basic point of view still stand on the basic propositions of this market and do not think of correction, although the logic of price correction is not observed in the current market conditions.
*** The role of infrastructure issues in the inflammation of the steel market
The statements in the market show that there is currently no color or smell of falling prices of raw materials in the domestic market. The rise in the price of the dollar has also made the rise in the world price of raw materials appear bigger than before. This has created a heavy resistance in the distribution channels of raw materials in the steel market. The recession in the steel market will continue as long as raw material prices do not improve.
Other infrastructure issues, such as power outages, have also been raised at regular meetings of steelmakers. This has dramatically increased the accumulated losses of manufacturing plants in recent months, which has been offset by the cost of raising the cost price. The consumer in the current market is besieged from several perspectives and no institution really supports this key role in the market. It is as if everyone has forgotten that the whole steel chain operates with the aim of gaining consumer satisfaction.
*** Power outages and disruption of production order in the steel chain
The electricity problem in the manufacturing sector is very serious. Market participants have heard that they say that we do not have electricity during working hours, our production line is asleep all day, the morning shift workers are almost unemployed, and on the other hand, the electricity contractor. In addition to the regular electricity bill, Fabz has now issued additional electricity to us under the heading of buying electricity from the private sector up to 7 times. Continuation of this trend can lead the steel market to trade in the precious metals sector next to gold. This is really unprecedented in the management of industrial production. Despite all these conditions, we are witnessing the growth of steel production in the market without customers. It seems that the producers’ warehouses have the capacity to not be welcomed in the market until further notice.
*** Steel production growth in the shadow of the market downturn
In line with the growth of steel production in the months In the past, despite the recession in the steel market, we will refer to the reports of the Iranian Steel Association. According to the statistics of this institute, the production of the country’s middle steel in the first two months of 1400, with a growth of 16% compared to the same period last year, has reached 5 million 605 thousand tons, of which the share of Billet and Bloom is 3 million 341 One thousand tons and the share of slabs was 2 million 264 thousand tons.
Billet and Bloom production in the first two months of this year compared to the same period last year, grew by 17 percent and slab production, grew by 13 percent. This shows that producers are satisfied with the current state of the market and are not too worried about the silence on the demand side. Most likely, their analysis is on the growth of steel prices in parallel with world prices, which have taken this behavior in the market.
*** Lack of capital market support for the commodity exchange
The capital market has also not supported commodity exchange prices. Despite rising prices, the capital market experienced a setback in the index on Sunday. Due to the inflow of relatively strong real money, more than 40 billion tomans today will most likely go up the market. Due to the upward trend of the remittance rate of the half dollar, which is considered as a positive signal for the products of listed companies in the commodity exchange, the growth of the index is inevitable.
According to the technical analysis of the total index chart and oscillators, which indicates the possibility of pullback to the ceiling of the range of 1,240,000 units; Finally, the conclusion of some experts in this field is to continue the upward trend and the positive trend of the capital market. If the capital market experiences significant growth, it is likely that the steel exchange will need to be prepared for relative price adjustments and capital migration to the market. There is still stray liquidity in the society and it can eliminate the recession of the steel market. Of course, this is a feedback from all the opinions of some activists and experts in this market, which may not be true and is not considered a buy or sell signal in any way.
*** Rollers in heavy losses of steel market
Another factor in the lockdown of steel market transactions is the poor performance of policies in the steel market in the field of rolling. Apparently the differences between the rolling field and the steelmakers; At the request of the Deputy Attorney General, the Deputy Attorney General asked Minister Samat to address the reduction of the price gap between ingots and climbing products in the Commodity Exchange. Yesterday, a copy of this letter was apparently sent to the Vice President and the Rolling Association.
Rollers complain about the high price of raw materials and claim that they receive high-rent steel ingots. This view was discussed in previous analyzes. To a large extent, rollers can be given the right. Unfortunately, the market floor is in favor of the basic markets in the steel exchange. However, it should be noted that the removal of rollers from the steel chain will lead to a major challenge for the steel market.
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