The direction of domestic steel prices is far from the logic of the world market and base prices in Iran. We see market development in the commodity exchange. Despite the expansion of the commodity exchange structure in the steel sector, the transparency we have been waiting for has not yet been achieved. In this memo, we will examine the asymmetry of prices in the domestic market with the factors influencing the price of steel. Please be with Artan Press.
*** Assessing the incompatibility of prices with domestic steel pricing parameters
Yesterday, pellets and iron ore concentrate were traded on the Commodity Exchange. Today, for the second time in the commodity exchange, sponge iron is to be offered. There are assumptions for buyers in these offers. Khuzestan Steel was last traded at a base rate of 117,335 Rials last week on the Commodity Exchange. Concentrate with a grade of 66% on the Commodity Exchange with a base rate of 24,000 Rials and pellets with a base rate of 65% 35,200 Rials were traded. But calculations show that the prices of concentrate, pellets and sponge iron have a price difference of 20, 30 and 66 percent, respectively, compared to the price of Khuzestan steel ingots. There is no specific reason for this. This is a challenge in domestic steel pricing that requires the attention of officials.
*** Deviation rate of induction field ingot with world prices
The second issue that needs to be considered is the ingot rate of induction in the commodity exchange. The average index rate of induction field growth was about 13,125 tomans per kilogram, including VAT. (About 12,040 Tomans without VAT) was observed that compared to the previous day; It has been accompanied by an increase in the average price of approximately 145 Tomans. But if we look at world prices in the field of ingots in the CIS, we will feel a huge difference. The departure of domestic steel pricing from global mechanisms can be detrimental in the long run.
This strange supercycle that started from the beginning of 1399 from the floor of 326 dollars and has reached 720 dollars with more than 220% growth until today.
But domestic steel pricing has been more influenced by the dollar and has not been influenced by global markets. It seems that the CIS bullion rate intends to pullback to the ceiling of its historic Price Action channel; That means probably some correction and stabilization of prices in the coming days. But in the Iranian ingot market, this price stabilization that is predicted in the world market does not exist.
*** Condition of non-compliance of price factors to long sections
Evaluations show that simply not matching prices does not end with ingots and steel raw materials. According to yesterday’s price chart, the ribbed rebar market also grew despite the falling dollar. This product was traded in the price range of about 13,750 to around 14,500 Tomans / kg, including VAT. The average price of this market today was about 14,080 Tomans, including VAT. This product is estimated (about 12,915 Tomans without VAT). Compared to yesterday, prices have been accompanied by an average and approximate increase of about 100 Tomans. In the world market, however, this growth has been much higher than domestic prices. Who will benefit from this temporary cross-selling?
*** The role of ingots and playing the price of domestic steel prices
The basis of pricing in Iran is based on the rate of ingots. Ingots after hitting the ceiling of the historical rate twice around 11,750 – 11,700 Tomans; And pullback in the range of 11,350 – 11,300 Tomans; Finally, for the third time and with the power of breaking this historical resistance, and leaving behind this resistance, it has even crossed the border of 12,000 Tomans today and now it has touched the figure of 12,040 Tomans; The average price that this market had never seen before.
Apart from discussing the record low steel prices in export markets; Which has not been recorded since 2008 and even in comparison with the dollar has decreased by half around 20700 Tomans, still justifies the domestic rates. But the convergence of domestic steel prices and international markets is one issue, and the price gap is more important.
*** The role of raw material price tolerance and domestic steel prices deviation
The main reason for the difference in domestic steel prices from the main parameters should be sought in the difference in the prices of raw materials and especially iron ore in pricing formulas. The issue of boiling and rising prices of raw materials in the upper layers of the supply chain of this strategic commodity in the country, such as scrap iron; Concentrate, pellets and sponge iron; They are also among the most important issues that have played a role as a powerful lever to put pressure on the final product rate in the country’s steel market and go hand in hand with the global steel price; These days, the desire for a retreat or a kind of deep adjustment of the steel price in the country has become like a mirage in the desert for the final consumer in the country.
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