Shift to Exports Driving Steel Prices

EghtesadOnline: Steel prices have been on the rise in Iran since early this fiscal year (started March 21) on the back of changing local and global dynamics.

News ID: ۷۴۲۸۳۸

18 July 2017

The growth, although welcomed by steelmakers, comes in the absence of any movement in the domestic market and is seen by traders as ill-supported.

Beam prices, for instance, have grown 20% to 19,000 rials per kilogram since late March. This is while demand for the material remains limited amid a years-long slowdown in the construction sector.

One US dollar was exchanged for 37,780 rials on Monday.

Ingot and rebar prices have grown, too. According to statistics released by Financial Tribune’s sister publication Donya-e-Eqtesad economic daily, private steelmakers quoted ingots at 17,000 rials on Sunday, indicating a 6.3% rise in a single day. Esfahan Steel Company’s rebar quotes also rose 4.06% to 20,700 rials during the day.

Analysts point to the growing attraction of export markets for steelmakers as the main reason behind growth in prices.

“Exports are quite appealing now. In fact, most of the growth in steelmakers’ stocks came on the back of rising exports,” says steel analyst, Keyvan Pourshab, emphasizing that rising shipments are driving production and consequently with their sights set abroad, producers are unable to supply the meager demand at home.

Over 1.08 million tons of semi-finished steel were exported during the first two months of the current fiscal year (March 21-May 21), up 45% year-on-year. Finished steel exports, on the other hand, were down 65% to 180,000 tons.

That is not all. The whole mining industry is experiencing a shift to exports, especially in the iron ore products sector, notably sponge iron and pellet.

Pourshab attributes this to the post-sanction attraction of exports as well as the government’s failure to make the local market attractive. Pellet and DRI prices have also jumped and buoyed semis along the way.

“This can explain the irregularity in the market’s dynamics,” he said.

Iron ore exports stood at 21.19 million tons worth $818 million last year, up 55% and 56% in weight and value respectively.

Another minor factor is the ongoing rumor in the market that the housing sector is expected to rebound after President Hassan Rouhani’s swearing-in ceremony and the official start of the 12th administration. This has prompted many suppliers to hoard their goods and wait for the right time to enter the market, stimulating prices.

Pointing to the reduced number of building permits issued so far this year, analyst Nematollah Mohseni argues that domestic demand is in fact shrinking and domestic dynamics have little to do with the upward price trend.

“There can be no shortage when demand is not growing,” he said, adding that global factors such as iron ore’s rally are pushing prices in Iran.