MSC Puts Local Market First

EghtesadOnline: Mobarakeh Steel Company expects to sell 76% of its products during the next fiscal year (March 2017-18) in the local market.

News ID: ۷۷۴۲۴۸

28 February 2017

Announcing the above, Amir Hossein Naderi, the company’s financial manager, forecast selling 6.97 million tons of crude steel and products valued at 199.9 trillion rials ($3.15 billion) next year, which would register an 11% and 21% growth in terms of volume and value respectively compared to this year.

“MSC’s net profit for the period is also expected to rise 53% to reach 18.9 trillion rials ($499.7 million),” he added.

Naderi noted that rising steel prices and the commodity’s positive outlook for next year are the main reasons behind his bullish forecasts, Financial Tribune reported.

MSC undertook several expansion plans in 2016, including a $143.4 million investment in setting up a continuous casting machine back in November. The new production line added 1.8 million tons to MSC’s annual steel production capacity and brought it up to 10.3 million.

Mobarakeh also intends to lower its production costs next year with the influx of cheap local pellets, especially from its own plant at Sangan in Khorasan Razavi Province.

According to Bourse Press, domestic government-imposed pellet prices are about 50% less than the $110 per ton rate offered by the Chinese.

Furthermore, the government plans to levy a 5-15% export tariff gradually over a three-year period on unprocessed iron ore to meet local steelmakers’ rising demand.

Based on the goals set in the 20-Year Vision Plan (2005-25), Iran seeks to become the world’s sixth largest steelmaker with a production capacity of 55 million tons per year.

As Iran’s largest mill, Mobarakeh will be primed to benefit from the new supportive measures the government is undertaking.

MSC’s ticker symbol on Tehran Stock Exchange was frozen on February 15 following the announcement of higher profit forecast. It returned to trading on Sunday, closing the day 1.6% lower at 1,404 rials per share.

Mobarakeh is TSE’s largest company in terms of capital, which stands at about 75 trillion rials ($1.97 billion).

Together with its subsidiaries, MSC is the largest flat steel producer in the Middle East and North Africa region, and Iran’s largest steelmaker, accounting for 1% of Iran’s GDP.

The company accounts for approximately 50% of the country’s total steel output and also holds around the same share from domestic flat steel consumption, which stood at 7.5 million tons in the last fiscal year. It produced some 5.5 million tons of flat products during the period.

MSC’s high profit forecast appears to be reasonable as with the 20% hot-rolled coil import duties in place, MSC has a firm grip on the local market.

Offers of foreign HRC currently exceed quotes of the material from MSC by at least $65 per ton in the Iranian market. In fact, hardly any foreign sellers were in talks with Iranian buyers in the second week of February, as demand for imported material was poor, Metal Expert reported.

Latest offers of cold-rolled coil from the Russian steelmaker Magnitogorsk Iron and Steel Works, otherwise known as MMK, were heard within €500-505 per ton FOB ($550-560 per ton CFR) last week.

Russian suppliers prefer to sell the material to other destinations where they can get better prices.

“Demand for CRC has improved a bit in Iran, but buyers still prefer the local material,” a trader said.

Mobarakeh Steel Company exported 1.37 million tons of hot, cold, galvanized, acid-washed, tin-plated, color-coated, corrugated steel coils and strips in the nine months ending December 20, indicating a 20% growth compared with last year’s similar period.