Rising steel prices continue in recent months, regardless of supply and demand, without following a logical path. Iran’s steel market, which has always been priced at a few dollars lower than the export rates of producing countries, is now priced higher than the global average. This could affect the entire steel supply chain in the near future. If the growth of steel prices continues with the same trend, it will open the feet of organizations and regulatory bodies to the market. This issue will be the beginning of the failed path of grammatical pricing and the beginning of double pricing of steel products in Iran. We will discuss this important risk in more detail below. Please be with Artan Press.
*** Rising steel prices in the shadow of unplanned industrial power outages
The biggest current crisis in Iran’s industry has been the decline in electricity production and the reduction of industrial consumption demand. This summer, the power outage crisis has sidelined many of the country’s steel products or halted production altogether. This issue caused us to have an early impact of this factor on the country’s steel market. In recent months, the most important factors that have affected the price of steel are power outages and lack of industrial electricity in the country.
Some analysts believe that this situation could have been predicted six months ago. He thought of arrangements and did not allow the work to be dragged here. If the Ministry of Energy had managed properly, we would not have witnessed this amount of economic losses in the steel production sector. The rise in steel prices in the current situation is the result of the mismanagement of engineers who have never been good managers.
*** The exponential growth of rebar prices due to various factors
We saw only how the power outage factor led to the rapid growth of steel prices. This increase in the price of steel went so far that the price of rebar increased from 13 thousand and 500 tomans to 18 thousand tomans. Price growth in the steel market has been almost unprecedented in the last decade. At the end of each month, each manufacturing company considers the cost of production of its products, and these producers are also looking for profit.
This is not the only issue leading to the steel market, and it can be said that power outages have had a significant impact on all products. When producers’ inputs and raw materials increase, it affects the cost price of products and the pressure of this price increase is applied to the final consumer. The rise in steel prices in this situation has been far less affected by the growth of the dollar.
*** Increasing the bargaining power of the supply side in the steel market
Prices in each market are determined by supply and demand. At some point, because they weakened the domestic market under the pretext of steel exports, they had to think about the rise in steel prices in the current situation. Due to the lack of demand in the domestic steel market and the zeroing of some demands in the commodity exchange, we witnessed conditions in which products were immediately included in the country’s export list. This issue was previously warned in an analysis.
With the emptying of domestic steel warehouses, we are witnessing a decline in steel production and supply in the domestic market. This has upset the balance of supply and demand. The current situation is due to the thirst of the market and the shortage of supply in the long sections. This issue is also dependent on electricity in the current situation. If the Ministry of Energy can manage the needs of cities and industries, the work routine will go back to a month ago and companies can continue to produce at full capacity.
Rising steel prices in the shadow of global prices and supply
Observations of international markets show that the growth of steel prices around the world is likely to be a prevailing phenomenon in the market by the end of the year. Of course, the price will fluctuate. But price growth is likely to be the predominant phenomenon.
For example, it is not bad to evaluate China’s performance in steel production. With the new decisions of the Chinese government to impose environmental restrictions on steel production and widespread power outages of steelmakers in some Chinese provinces, the production of rebars and hot rolled sheets has reached its lowest level in four years. This has helped boost prices and increase the profitability of Chinese steelmakers. This indicates that the international market will welcome the growth of steel prices. This phenomenon will also be effective in encouraging price growth in the Iranian domestic market.
*** The role of political factors in the Rising steel prices
Along with energy and supply-side categories and risks, political factors will not be unaffected by the growth of the dollar. The dollar exchange rate is a very important factor in steel pricing. The rise in steel prices in recent years has been the result of successive manipulations of the dollar. But in the week ahead, the market is facing a significant fluctuation of the currency, after the speeches of the Supreme Leader on Wednesday about the Vienna talks, the dollar reached the border of 26 thousand Tomans.
According to tomorrow’s trading and the dirham rate, there is a possibility of the dollar growing this week, although the intervention of the market maker can be effective in controlling this excitement. But the dollar of 26 thousand tomans will cause the price of the dollar to rise. Unfortunately, political factors are not controlled in the current turbulent situation and can make the accumulated losses of the steel industry heavier day by day. Although there is still a deep and breathtaking recession in the demand side of the market, there is always an excuse to increase prices in the supply side.
*** Increasing steel production costs and reducing producers’ profitability
In general, it should be said that in the current situation, the costs of steelmakers have reached the highest possible level. Some manufacturers due to the use of old technologies and machines and tools that are optimal in the face of sanctions
Have not been operating in the loss phase. The fact that these production units can still survive is due to the energy subsidies they received. Certainly, in the current situation, the growth of raw material prices will lead to the growth of steel prices. For example, scrap and iron ore are products used for the initial fabrication of rebar. Of course, with the increase in the price of rebar raw materials, we will see an increase in the price of this product in the market. This reason, along with other problems, has caused the price of sections to grow exponentially.
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