Khuzestan Steel Company will offer 70,000 tons of products including 40,000 tons of slabs and 30,000 tons of steel bloom ingots on the Iran Commodity Exchange on Tuesday, September 14th. The drop in demand for steel ingots was felt sharply on Tuesday. The supply of 30,000 tons of Khuzestan Steel Bloom ingots in the Commodity Exchange was finally traded with a demand of 3,000 tons at the base rate of wrist. This means that only ten percent of the supply had a buyer. There are various political, economic and technical reasons for this, which we will address in this analysis. Please be with Artan Press.
*** Decrease in demand for Khuzestan steel ingots in Tuesday’s trading
According to the announcement of the supply of the Iran Commodity Exchange, 180,500 tons of various steel products were traded yesterday. In this deal, including all kinds of ingots and sheets on the board were offered. Khostan Steel Supplies with Fakhooz trading symbol recorded a significant drop in demand in this market. The decline in demand for steel ingots in the market may have been due to a possible change in pricing formulas. This can also be seen in the drop in prices. according to this; The average base price of G galvanized sheet is 250 thousand and 632 Rials, which is 6.8% lower than the average base of the previous supply. Also, the base price of Khuzestan C-slab ingots was accompanied by a decrease of 1.2 percent. This comparison is 163,995 rials compared to before.
*** Inflammation of the dollar market gripped steel ingots
Economic and foreign exchange factors have been influential in the decline in demand for fakhuz ingots. If the dollar wants to be 16 thousand tomans, that is, the current exchange rate of 27 thousand tomans, the market must correct it by 68%. Or the half dollar of 23 thousand tomans should be corrected by more than 40%. These issues are due to the decades-long correlation between the total capital market index and the dollar exchange rate; That is, the index will gradually improve by 30 to 40 percent. That is, around 1,150 to 1,250 million units, which will be followed by a capital market protest.
On the other hand, smuggling of domestically produced products such as steel and imports will also intensify. Eventually, the country’s small and large industries will be paralyzed and the government will face a currency deficit from exports. Unless there is a fundamental opening such as an agreement to lift sanctions, which means a real reduction in inflation in the country. Currently, the decline in demand for ingots in the Commodity Exchange for Khuzestan Steel stems from this scenario.
*** Global factors of steel transactions in the decline in demand for steel ingots
Another important factor that has led to the decline in demand for fakhuz ingots can be attributed to global transactions. Reduction of world steel prices; Compared to other speculations, it will be far less challenging for domestic markets. It will be the best and most painless situation possible for the regulators of our domestic steel market. But now where is 600 and where is 420 ?! 43% correction of the world steel price should be done, which is not unlikely, but there is no news about this at the moment. But in any case, we have seen a decline in demand for steel ingots.
*** Changing the pricing formula of steel and inflammation in the ingot market
Reduction of the coefficient from 95% to about 65%; Faceless means; Opening the door to smuggling and a delicious table for our neighbors. Experience has proven this. Because the vastness of our land and water borders with our neighbors, it is practically impossible to prevent smuggling even with the enactment of regulatory laws. According to some ways, steel reaches half price and its real value is very high in the hands of our neighbors. Everyone is waiting for big changes in the structure of prices and market transactions. This situation may better justify the decline in demand for Fakhuz steel ingots. A case can also be a combination of the above three cases. However, it is not impossible for anything to happen. So that these numbers can experience various changes that are supposed to be left to the esteemed audience.
*** Decrease in supply demand for ingots; Warning to domestic steel marketers
Or we should see the opening of foreign economic relations with the world and the lifting of sanctions in order to expect the real value of our rial to increase. In any case, the path of falling demand for Fakhooz ingots, like other products, is currently facing a challenge. Or the world price of steel should be reduced by 40% in order to achieve a rebar of 10,000 Tomans in the domestic market without any problems.
Apart from these two, if other things happen to the market. With many challenges and potential long-term damage; It will be like repeating the actions of previous governments during this last 30 years at least. The Iranian market is associated with price challenges. You have to think a little about the end consumer. The current structure of the Iranian steel market needs to change. The new government must decide on this immediately Hundreds of reductions to achieve 10,000 Tomans rebar in the domestic market without any problems.
Apart from these two, if other things happen to the market. With many challenges and potential long-term damage; It will be like repeating the actions of previous governments during this last at least 30 years. The decline in demand for ingots is currently on the alert stage. The Iranian market is associated with price challenges. You have to think a little about the end consumer. The current structure of the Iranian steel market needs to change. The new government must decide on this immediately.
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