Billet offer prices surge at Iran exchange

The Iran Mercantile Exchange (IME) has witnessed a sharp rise of IRR 10,000-12,000/kg (USD 35-40/t) in domestic billet offers over the last 15 days, according to Steelmint analysis.

During the second week of June, average offers were around IRR 56,820/kg. But on Wednesday, offers surged to an average of IRR 67,890/kg, with the sales volume setting a single-day sales record of 98,300 MT.

The sharp increase in billet offers was a result of sudden depreciation of Iranian rial to the dollar on Wednesday. Steelmakers raised offers to keep IRR-based prices in line with dollar-denominated, globally traded billet prices. A sharp uptick in demand for billet helped sellers offload cargoes to buyers at these elevated prices.

The ministry of industry, mines and trade is taking steps to improve billet supply and control prices.

At a recent meeting between the ministry and billet makers, it was decided that the ministry will provide additional DRI to induction furnace-based billet makers to overcome supply shortages while steelmakers would have to offer 40% of their billet production at IME.

While the ministry is optimistic that this decision will boost billet availability, billet producers are skeptical about a surge in DRI supplies, as DRI manufacturers are seeking to make more steel products as part of Iran's Vision 2025 on boosting steel output to 55mtpa.

Induction furnace-based billet makers have a high cost base and even with additional DRI supplied by the ministry, these privately-run companies may find it hard to offer billet at reduced prices on IME. On average, IF-based billet makers sell their production at 15%, or around IRR $15-20/t, higher compared with other types of billet producers, said a person familiar with the matter.