In recent days, the Iranian steel market has been affected by control signals in the global steel market. On the other hand, China’s policy of reducing production has led to a recession in steel markets. On the other hand, the Iranian market has not yet stabilized prices. Any emotional price drop in the market will change the situation in favor of speculators. There seems to be some false demand for steel in the domestic market. In the following, we will examine the different dimensions of this issue. Please be with Artan Press.
*** Influence of domestic steel market from international signals
The situation of Iran’s steel market due to the approach of Iran’s export rates to world markets is strongly affected by global market signals. Given the global market conditions and the continuation of China’s steel production reduction policies, it seems that the downward trend in world stone prices will continue. If the price of iron ore reaches the domestic market, it will most likely overshadow the price of steel ingots. If this scenario becomes a reality, we will see a false demand for steel in the domestic market. Because the fall in iron ore prices by not accompanying the dollar exchange rate only shows that this is a cross-sectional rate reduction.
*** False demand for steel affected by the global market downturn
Finally, the Iranian steel market is not separate from the world market. There are several factors involved in advancing this path. False demand for steel can occur only with the onset of an upward shock, but the continuation of the downward trend in prices in foreign markets suggests that it may still be too early for demand to enter. This will support the iron ore market.
On the other hand, the conditions of the iron ore market these days are more in the direction of price reduction, because on the one hand, the policy of reducing China’s steel production continues, and it happens to be stricter every day in the steel-making provinces of this country. Of course, it should also be noted that whispers of declining steel production are heard from the UK and some other European countries that own the steel industry, except for China, because of rising energy costs; Their reasonable profit has also overshadowed them.
*** China’s role in creating steel demand resistance
An important and key factor that can increase the demand trend and take the market out of the policy for which China and other countries have prepared is the normalization of the corona trend in many countries. The corona pandemic is fading in some parts of the world; Demand for automobiles and construction projects has flooded the market, but market participants are still pushing for more Chinese output. If this path continues, the market may lose control of China. After all, the irrational reduction of steel prices in Iran and the false demand for steel will ultimately be to the detriment of the real buyer and the supply chain of steel.
*** False demand for steel under the pretext of disrupting market order
The steel market does not have a clear order in terms of macro. This situation will increase the conditions for false demand for steel in Iran and the world. On the one hand, we hear the weak recession in Turkey and the Black Sea. On the one hand, there are problems with electricity supply and restrictions on steel production, and in general with the recent events in the Chinese market. As we know, because of the cowardly sanctions imposed on us by the United States; We have been in dire need of non-oil exports for years.
We have been trying for years to get rid of the oil economy, and this has been achieved to some extent by focusing on non-oil exports such as steel and petrochemicals. We have seen significant growth in steel production in recent years; We have become the tenth largest steel producer in the world. But some recklessness in recent years has made it difficult for domestic market order and continued exports.
*** Iran’s forward solution to control the price of domestic steel
In order to be able to manage the false demand for steel, Iran must have full control over its import, export and domestic sales situation. How much of this produced steel can be the share of the domestic market; At what price to sell in the domestic market; These are issues that are entirely in the control of the government and the regulation of the domestic market. Sometimes excuses have been given to brokers from these bases and all market power has been drained from it.
*** The role of the government in regulating the transactions of the Iranian steel market
The government has played an important role in controlling and directing the steel market. It is important to know that in the domestic steel market of the country, due to a significant excess of production over consumption; What determines the price of steel in the domestic market; These are measures taken by the government with its medium-term policies to balance the supply of steel in the domestic market and exports. The government’s policy has always been to try to establish a kind of balance in the country’s steel market in order to maintain the export markets first and then supply the domestic market. Price regulation in the domestic steel market has always been the biggest challenge of the government.
In general, the promises made by the officials and the government about the price of steel in the coming days cause confusion and hesitation among market participants, which makes it impossible for us to correctly decide whether the demand has reached a reasonable level. Were prices last week false or real?
At what price and by what volume should our produced steel be regulated and injected in the domestic market; It is an issue that, in addition to the impact of dollar parameters and global rates, is related to the country’s managers and managers of large steel industries and their important decisions in maintaining the balance of the domestic and export markets. For this reason, in recent months, the market has changed.
*** Delarization of steel prices in the domestic market
Experience has shown that whenever the government’s need for foreign exchange intensifies, the need for foreign exchange from exports also intensifies, and therefore the focus is on steel exports, and as a result of neglecting the domestic market, there is a shortage and famine. On the other hand, due to the intensification of the need for currency at the same time, exchange rate fluctuations or the so-called increase in the exchange rate and intensification of currency inflammation, cause fear of survival and intensify the false demand for steel in the domestic market. In a way, it can be said that the false demand for steel is strongly dependent on the dollar flow in Iran.
*** Defective ordering pricing cycle in steel management system
The following multi-unknown cycle or equation is repeated many times. In the first step, the intensification of currency inflammations and the shortage and need for foreign exchange from exports have been felt. In the next phase, there has been an intensification of the focus on steel exports for the currency of exports and a shortage of steel supply in the domestic market.
The third stage is the shortage of domestic steel supply and the increase in the exchange rate, which leads to the intensification of the false demand for steel in the domestic market due to the fear of the remnants of inflation. The next step is to create an artificial famine in the market and increase the exchange rate; Steel prices are skyrocketing. And finally, the government is desperate. This is because the two or three-month export commitments of the steelmakers cannot be canceled. This vicious cycle has been repeated in the domestic steel market of Iran for many years.
*** Wrong policies and false demand for steel
Government policies to regulate exports and domestic quotas should be at least quarterly. It is imperative that the government refrain from planning to create the hour in order to gain the trust of market buyers on both sides; That is, whether domestic or export; This will strictly control the false demand for steel in the short term. It has happened many times; Under the pressure of steelmakers in order to provide them with the idea of making more profit in the export market and in order to provide government currency; The government has waived the need for steel and domestic quotas; Then, after the outbreak of inflammation, it could not prevent the steelmakers from fulfilling their obligations under the export contracts, arguing that they would be subject to penalties for delay in commitment.
*** Considering the supply of quotas for the domestic needs of the steel market
The government should not be careless about meeting domestic demand quotas. After concluding and concluding 2 to 3 months contracts, steelmakers will not be able to do anything to meet the needs of the domestic market. This issue creates the first sparks of false demand for steel in the steel market. Non-executive officials of the country; For example, honorable members of parliament; They should not comment directly on executive issues. They should not talk about the price. Their involvement upsets the psychological balance of the market; And the occurrence of false demand for purchase or refusal to buy and shrink the spring of domestic demand will have unpredictable and irreparable consequences of several months.
*** Key offers to get out of the false demand of the country’s steel
For the current situation, solutions to control the false demand for steel are proposed. Not neglecting to monitor the regular supply of domestic steel quotas is a very effective issue in this sector. Because it is not possible to cancel the export commitments of steelmakers for 2 to 3 months after the outbreak of domestic market inflammation. On the other hand, refraining from repeatedly changing the tasting guidelines of market regulation under the pressure of trade union interests and golden signatures and ensuring that the law is not changed and non-executive officials refusing to comment directly in the media and the need for a single tribune. It is hoped that by observing these cases, we will see a calm atmosphere in the domestic steel market by the end of the year.
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