Iran’s economy, and in particular Iran’s steel industry, has become heavily dependent on two important factors: the exchange rate and the news and political excitement, and we have always seen in recent decades that changes in these two factors have played a significant role in the steel market. In the market these days, we are witnessing the movement of these two factors in the Iranian steel market, and in practice, the confrontation of these two factors has caused the steel market to enter a short-term recession.
*** The post-Trump era in the Iranian economy
Iran’s economy is in a situation where it is looking for a new position in the post-Trump phase. Therefore, most economists call this phase the transition phase of sanctions. Usually, inflation expectations disappear and markets enter a short-term sleep. The steel market is no exception and its recent recession is due in large part to this issue. The country’s steel market in all areas and sub-sectors is reported these days with relative silence and calm.
But we will refer to the first factor, which is the exchange rate. Yesterday, for some reason, the exchange rate experienced a relative fall. This was observed in both remittances and UAE dirhams and dollar transactions in Herat.
According to some hearings and evidence and market monitoring; Due to the relatively noticeable decline in the exchange rate today, the markets are currently in a quandary and now the “patience and watch” strategy has been adopted by the market demand. Today, in a word, the situation in the foreign exchange market has intensified the skepticism and hesitation of market participants, so that doubts have prevailed in sales and decisions. This happened again in January. And it will probably be revealed again with contradictory political news.
*** Currency market developments and its impact on the steel market
However, regarding the developments in the foreign exchange market and its impact on the Iranian steel market, we should note that we first heard that the trend of marginal foreign exchange markets is decreasing. This meant that trading currently fluctuated at the level of buying and selling dollars and would not be the basis for trading in other markets.
This downward trend in the gold market was also clearly seen; The decline continued until midday yesterday and then stopped; Around 3:00 PM, the market increased slightly again. For example, we heard that the UAE Dirham, which had broken the support of 7,000 Tomans, has experienced a return to the border of 7,000 Tomans. These exchange rate fluctuations caused us not to see a good day for trading in the stock exchange and the free steel market.
The weather in the steel market was dusk yesterday. We saw a market where it was difficult for market participants to discern trends and decisions. Yesterday’s trading slump had other political reasons related to last week’s news. By the end of last week, all eyes were on political movements. If the sanctions are lifted, the exchange rate will fall. Naturally, the market will be dragged into recession and prices will fall. But we have seen that the Biden government is currently seeking to mediate hollow and ineffective actions, and this prospect is unlikely to emerge in the short term.
*** Not happy with the complete lifting of sanctions
Given the scenario of complete lifting of sanctions, this is not something that analysts and traders are happy with. The market is not very interested in this scenario. But if the sanctions continue, considering that it is not far from the Nowruz holiday, the market does not have the opportunity to change seriously, provided that the prices of ingots and iron ore abroad do not change. Therefore, this is another factor that does not encourage the buyer to buy more early.
*** Recession in the steel market
But as explained, prices and recession in the Iranian steel market depend on various factors beyond the exchange rate. In this way, if the sanctions are lifted and the price of ingots rises abroad, there will be no serious change in the market. The market is still in recession and prices are still at the same level. Also, the opposite scenario of this path is that if the sanctions are lifted, the market will face a price shock, but it will return slowly.
The reason why we have considered the goals short-term is because the political factors that dominate the market have clearly stated their role and impact on the market for the next one month. We will face the elimination of 42,000 Rials and the increase in wages, freight, electricity and gas. As a result, the cost price for the producer will rise. Naturally, the price level next year will be different from today.
*** Create market monitoring scenarios without interfering
Another factor that plays a role in the current market downturn is the creation of market surveillance scenarios without interference. Next year’s budget structure has created a situation where few people turn their main strength, liquidity, into a commodity at the end of the year. What is clear to everyone is that the first power in the financial markets in the current situation is in the hands of liquidity, and the steel market has been greatly affected by this. Due to budget changes, regardless of political issues, whether the lifting of sanctions or its continuation, prices for next year have no room for reduction and their base will not be lower than this year.
*** The stock market is a full-fledged mirror of the country’s economy
The stock market itself is a full-fledged mirror of the country’s economy and the path to parallel markets, at least in the short term. As you have seen in recent days, the outcome of the movements in the stock market is moving towards zero. Any positive movement in the market is responded to by the heavy supply of reals, and legalists have no desire to gather sales queues. On the other hand, the current structure of the stock market has moved towards capital imprisonment and is practically witnessing a recession and a halt in the Tehran Stock Exchange We are. The same can be easily attributed to commodity markets, especially iron and steel and other metallic materials.
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