The question that has arisen for many activists in the Iranian steel market is that despite the severe recession in all financial markets, housing, cars, stock exchanges, securities and all commodity markets, we are witnessing an emotional increase in prices in the steel market. The direction of the steel market is by no means predictable. This issue can hit all the actors of the steel chain and only its profit will go to the pockets of the rents. In this memo, we intend to clarify the situation of the steel market. Please be with Artan Press.
*** Unimaginable inflammation in the field of domestic steel
Unfortunately, in such days, few people in the Iranian economy imagined the inflammation and fluctuations of the middlemen in the steel market. Unfortunately, the dollar exchange rate shocks have hit the domestic steel market and upset the balance of supply and demand since the beginning of this week. The occurrence of inflammation in the country’s steel market is affected by the unrest in the foreign exchange market and the change in the trend of steel export markets. Unfortunately, the dollarization of the domestic steel market has no justification and only ends in favor of traders. The basis of steel market pricing in dollars is a strategic mistake that the steel market suffers from.
*** Dollarized steel prices in the Iranian market
In the past few days, we have witnessed the growth of the dollar price up to 450 Tomans and it has entered the channel of 26 thousand Tomans. This issue has no effect on the cost prices of steel in practice. Because Iranian steel is a self-sufficient industry and almost one hundred percent chain Steel is produced in the country and Iran has reached complete self-sufficiency in this field. One of the most thought-provoking events of the past few months; The coordination of the change in the exchange rate trend and the export markets was simultaneous, and this convergence between the currency and the steel export rate has itself intensified the decrease or increase trend.
*** Housing injection into the steel market
Unfortunately, in recent months, housing has entered the steel market in pricing, which, under the current conditions, only provided brokers with the opportunity to fill their steel warehouses with low prices for such days. What has happened in the steel market over the past few months coincides with a decline in the export rate of steel in export markets; Influenced by the US election climate and some hopes for the outcome, the value of the rial began to rise, which intensified the expectations of a decline in the domestic steel market for all sub-sectors in this area.
*** The impact of politically optimistic factors on steel pricing
All markets were practically locked in the hope of reviving Borjam in the Biden government and lifting sanctions, and the same dollar that was introduced to the market yesterday at a rate of nearly 27,000 tomans despite the Central Bank’s consideration was close to the 20,000-toman channel at the time of Biden’s victory. And practically in the same situation, there was no buyer. So what happened that in less than a month, the dollar has become 7 thousand tomans more expensive? Unfortunately, the pulse of the market is in the hands of the steel market maker and the final buyer is in a difficult situation in the steel supply chain.
*** Change in steel export rates
Along with the increase in the exchange rate, due to the bad luck of the domestic consumer, the steel export rate has also changed direction and now the expectations of increasing prices in the domestic steel market are based on the current situation governing the regulation of the country’s steel market; From the residents of this market, it has increased and, as we have seen, since the middle of last week, the demand has returned to the markets.
*** Nowruz holiday causes inflammation of the steel market
The third fundamental proposition that can be seen to some extent in the occurrence of inflammation of the domestic steel market; The discussion of limited time is about 20 days until the end of the year and the beginning of the Nowruz holiday of factories, which will create a kind of urgency for domestic buyers in the discussion of time limit. Similar to Chinese holidays, Iranian factories need to maximize their inventory before the holidays, as prices usually rise in the new year and investors want to prevent costs from rising at the beginning of the year.
*** No withdrawal of raw material prices in the steel chain
The issue of non-retreat of raw materials during the downtrend is an issue that has led to rising domestic steel prices. As we have heard, sponge iron and scrap iron, as the source of raw materials for production in the private steel sector, even at the height of falling final product prices refused to retreat seriously in these markets, so that some private factories are under pressure and looking for an opportunity They were escaping this bottleneck. All these factors went hand in hand so that the domestic market could see a noticeable rise in prices since the middle of last week …
*** Concerns about the stock of steel warehouses
Considering that there is not much time left until the beginning of the traditional holiday of Nowruz and the end of the year, and on the other hand, since for a long time, our domestic market was in a recession and erosive silence and a kind of spring of demand was somewhat tightened, if Or a special agreement in the political field of the country does not occur before the end of the year; It seems unlikely that this market will give way to the idea of retreating before the end of the year, especially now that the other side of this balance, namely the Tehran Stock Exchange, is also; All the officials are determined to raise this market and therefore they can not put as much pressure on the producers and legal entities as in the past to keep the price of the product low.
*** A sharp decline in demand in the long-term market
Despite the fact that today the average rate of the market for long steel sections is increasing; The purchasing power of the market and the volume of demand in general have clearly decreased; In the capital market, this situation is called “negative divergence”; In the negative divergence, market players
They are in a state of alert, patience and watching again, and that is why in some points of sale by some bankers, we see some offers below the price to attract customers.
*** The political dichotomy of the steel industry
We are currently facing two distinct considerations in the discussion of the country’s foreign policy; One is to be optimistic about concluding some agreements in the 90th minute and the possibility of some openings in sanctions, and the other is not to be optimistic about the outcome scenario and looking east to resolve economic crises, both of which are almost possible. Certainly by next week, some issues have been clarified and market participants will get rid of this uncertainty and find their way better.
*** Hot plate rate adjustment
Unfortunately, during the increase in market prices, for the reasons described above, we see changes in base rates and price manipulation in the steel market. What happened when the coefficient of determination of the rate of hot rolled sheet increased by 5%? Was this included in the market regulation policy or is it new? Do these changes also apply to determine the base supply rate of ingots? Why should the audience and the people be unaware of these changes and the exact formula for determining the base rate? Is it a security issue or is it something else? Why not clarify how to determine the base rate of supply and changes made?
The reason for the 5% increase in the base rate coefficient of hot plate and the significant gap of about 10% between the rate of “hot plate” and “hot plate B” this week; It is our big question mark, and we are more concerned about this transparency, and we believe that these unexpected events will cause the distribution of rents in the market and eat the balance of the markets.
*** Market evaluation of ribbed rebar
The stable ribbed rebar market has started to work up to 50 to 100 Tomans increase in some bases of this field, but what can be seen from the evidence and hearings so far, the demand response to the continuation of the upward trend has been negative and has fallen behind again. , As it seems, silence, calm, doubt and hesitation have overshadowed this market again …
*** Increased risk of entering the steel market
The main reason for this skepticism in the market is the halt in the upward trend of the exchange rate and some hopes for sometimes positive news in the informal media, which shows that there is still a group of public opinion to lift at least some of the sanctions and the possibility of some agreements between the US and Iran. They are optimistic in the Barjam process. We have to wait until the third of Esfand to see what version the policy will be for steel.
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