At the end of the trading day on Wednesday last week, an issue was raised by Mobarakeh Steel, which had previously been on the agenda of steel sales for a while. The issue was for steel companies to license off-market sales of their products to a number of specific customers. In this memo, we will discuss the issues, advantages and disadvantages of selling steel products out of stock in steel chain balance. Please be with Artan Press.
*** Steel market matching
The way in which steel products are sold in an environment outside of stock exchanges is called steel market matching, which has recently been deeply evaluated in the metals market and experts have expressed their views in this regard. Unfortunately, in the current context and with the establishment of the current culture in the metals market, matching trading has become a major challenge for commodities. Because the rent distribution of this method is very high and the difference between the free market price and the commodity exchange is so attractive that any company or real person who buys and sells through steel matching transactions makes a huge profit.
This system, which delivers steel, metals and metals to the buyer without administrative formalities and without offering goods on the stock exchange, has great weaknesses, and the continuation of this process will lead to a deeper trading gap between the free market and the commodity exchange.
*** Matching effects
Mobarakeh Steel Company insists that, like the current system, the products will be sold directly in the match as a special offer without being offered in the hall and competing. This issue may be attractive for steelmakers in the short term. But with the passage of time and the increase in the price difference in the open market and the commodity exchange, a severe recession will prevail in the steel market, which is It will ultimately hurt steelmakers.
Interestingly, many steel companies are reluctant to offer their products by machining. But Mobarakeh Steel Company of Isfahan sells about 60% of its products in the form of machining transactions to certain companies and individuals. The purchase of steel sheets in the machining process is monopolized by certain industries and individuals, which is allocated to specific individuals at the discretion of Mobarakeh Steel without any supervision by the Commodity Exchange or the Ministry of Silence.
*** Additional quotas allocated to automakers
But the interesting point in matching transactions is that some buyers, such as domestic automakers, receive more quota than they need without registering their production and needs in the optimizer system. When they are given more steel sheet quotas than the automaker needs, the question arises as to what the extra quotas allocated to automakers are spent on.
Isfahan Mobarakeh Steel is the largest steel producer in Iran. Unfortunately, 60% of the production of this factory is given to certain groups of companies and individuals. So it can be claimed that the largest steel rent in the country is in the bottleneck of Mobarakeh Steel Machining Trading. Therefore, it can be argued that quotas and grammatical pricing system are the main cause of rents and steel matching transactions, and until this problem is resolved, we will continue to see such events.
In the current situation, we must move towards the parameters and indicators of the establishment of a free economic system in the country. If the economy is free and prices are determined on the basis of supply and demand, because there are fewer potential rents in the industry, steelmakers will do less, and policymakers will achieve their main goal of better market balance and reducing corruption.
*** Supply of all types of long steel sections in the commodity exchange
In total, from the total initial announcement from the last trading day of last week, about 196 thousand tons of supply of long steel sections in the commodity exchange; 187,198 tons of supply went on the board; Of this amount, 45,096 tons (about 23 to 24% of the total supply volume) were sold in the trading ring of the Commodity Exchange; Regarding the demand for matchmaking, if certain buyers want, they can buy again. This means that even in the days of market downturn, matchmaking transactions have good conditions and are always attractive to special buyers.
In the last transactions of the previous week, a total of 184,737 tons of steel bloom ingots were sold, of which 164,287 tons of steel ingots were offered in the commodity exchange, of which 41,250 tons were favored by the buyer (including matching ) Is located; (About 22 to 25% of the total supply volume) which with this account the weighted average rate of these transactions is estimated at 95,428 Rials (about 10,400 Tomans including VAT). Therefore, as it is clear from the statistics of the last trading day in the commodity exchange, a significant part of the steel produced by steelmakers is traded daily in routes other than the commodity exchange.
*** The reason for Mobarakeh Steel‘s insistence on selling steel outside the stock market
The entry of steel into the stock market took place at a time when free market rents had severely reduced the purchasing power of the final consumer. But the entry of steel trades into the stock market was extremely beneficial to the industry. The exchange creates a sales mechanism on a business-to-business basis, and the consumer buys a commodity directly from the producer of the raw material without the presence of intermediaries. In this way, during the price matching process, the producer is able to sell his product with a specific price mechanism.
Mobarakeh Steel has changed its trading process in the fall, for example, in November, the company did not observe the supply floor, despite being required to offer all its products on the commodity exchange, as in previous months, more than 60% of its product Overseas goods sold. It is necessary to explain that the Commodity Exchange has not registered matching transactions since October 15, and any off-exchange sale means distribution outside the network and against the law.
The reason for Mobarakeh Steel’s insistence on selling steel product outside the stock exchange should be asked from the company’s officials. In this regard, and to make the performance of Mobarakeh Steel Company of Isfahan more transparent, the Commodity Exchange has reported the performance of Mobarakeh Steel Supplies to regulatory organizations, including the Inspection Organization, the Competition Council, the Ministry of Silence and the Attorney General’s Office. Therefore, we have to wait and see what approach will be taken by the mentioned organizations for this company.