Iran: Billet export offers witness a sharp rise

Iranian billet export offers registered a steep rise this week on rising global scrap prices and Chinese rebar futures. On account of tight availability, imported scrap prices to Turkey increased by $60/the month-on-month (m-o-m) in recent bookings confirmed by SteelMint this week. On the other hand, Chinese SHFE rebar futures registered a w-o-w rise of RMB 48 ($7.31) and yesterday settled at RMB 3,913/t.

A market source mentioned that Iranian mills are offering at $460/t, FoB levels. However, we didn't witness any trades at increased price levels. Although, in conversation with a few of the leading Iranian mills, we learned that export tenders are likely floated by next Iranian week (Saturday-Thursday)

SteelMint assessed Iranian billet export offers to be at $460-470/t, FoB up by $25-30 against last week.

Domestic prices rebound at IME demand remains sluggish: The Iranian domestic billet prices rebounded in a recent trade event hosted at the Iranian Mercantile Exchange (IME). Yesterday, over 150,000 t billets were offered against which only 41,250 t traded, at an average price of IRR 96,228/kg ($362/t), up by IRR 6,943/kg ($14/t) against last week.

Iranian steel market participants suggest a revision in pricing mechanism at IME-

On government's intervention in setting up the steel prices, the head of Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIM), Mr. Masoud Khansari, wrote a letter to Mr. Mohammad Nahavandian (Vice President, Economic Affairs) asking for setting up a committee, comprising of TCCIM and Iranian Steel Producers Association (ISPA) to revise steel pricing guidelines, as per inputs received from Financial Tribune.

The key highlights of the letter are-

• As per recently announced regulations, steelmakers are obliged to sell their products at the IME 25% below world market prices. It has created high volatility in the steel market and artificial demand due to lower IME prices.
  
  
• While policy and decision-makers ostensibly take such measures to reduce the final offer of steel in the domestic market and support end consumers, in essence, such moves have had the opposite effect.
  
  
• Khansari warned that the new pricing mechanism could pour IRR 800 trillion of easy money into the pockets of dealers and the army of middle-men.
  He described the interventionist approach to the steel market as "a serious threat" to the production and export of the major commodities.
  
  
• He also pointed to the new regulations on the steel billet exports could undermine contractual obligations of steel companies to foreign buyers.
  
  
• "Steel billet accounts for 70% of steel export," he recalled. He further added that such an ill-advised policy is incompatible with the country's oft-mentioned trade policy that lays extra emphasis on non-oil exports and weans away from volatile international crude prices.