The government had to intervene to bring back stability by fixing USD rates and transferring bureaux de change's activities to banks, but the implications were far-reaching for businesses working with USD.
Let's consider the steel industry, as one of the few non-oil industries prospering on the export front.
Exporters and even local traders say they have put everything on hold for now, until the dust settles on the new normal, according to Financial Tribune.
"Exports are in lockdown," said Khouzestan Steel Company's sales and marketing manager, Bahman Tajalizadeh. "The only exports taking place at the time are our previously arranged obligations and we don't even know how we're going to get the money."
The stabilizing act of intervention has in fact sowed confusion in markets, according to Tajalizadeh, as companies are unable to have any future plans or forecasts in the current situation.
For one thing, the new 42,000-rial to USD rate set on April 9 is not particularly attractive for exporters.
KSC, for instance, had forecasted a USD revaluation rate of 48,110 in its performance report for the first 11 months of the last fiscal year (March 21, 2017-Feb. 19). And considering that KSC exports over half of its production, the new rates mean a steep drop in profits.
Petrochemical producers, too, are not comfortable with the turn of events, especially since they enjoyed a 35-40% jump in commodity prices on Iran Mercantile Exchange during the recent currency crisis. They boosted supplies to cash in on the situation, but have since dialed back shipments due to depressed prices.
Khorasan Steel Company's deputy head for sales echoed the same concerns, emphasizing that the forex confusion has also put local trading on hold.
"It's simply not feasible to buy or sell at the time. Current prices are unattractive for buyers and concerns regarding the market's future and import prices keep producers from selling," Mohammad Hassan Parsa also told the Persian economic daily Donya-e-Eqtesad.
In its latest report, Metal Bulletin, the London-based information provider on global steel markets, also described steel import trade in Iran as "non-existent" in the past several weeks.
The biggest losers here might be the downstream users relying on the now-reluctant upstream suppliers. They have repeatedly voiced concerns about supply shortage, arguing that producers use no FX-dependent material for production to be affected by USD fluctuations. But their criticisms of pricing formulas have so far been out-voiced by the FX uproar.
> FX Trading System Still Unclear
The sudden change in FX rates notwithstanding, it's still unclear how the new USD trading system will work.
"We've no idea how forex transactions are going to take place now. Banning bureaux de change from trading forex has essentially stopped the money flow," says Ali Naeemi, commercial manager of Pasargad Steel Company.
Just days after putting an end to the dual foreign exchange regime, the Central Bank of Iran announced that banks will take over forex trading, leaving exchangers in the dark. Consequently, Ferdowsi Street–Tehran's FX trading hub–became deserted, with exchangers putting up signs saying, "No forex trading until further notice."
Making things even more convoluted in the name of transparency and market regulation, CBI said that basically all forex demand is to go through and be registered on the regulator's Forex Deals Integrated System, locally known by the acronym Nima.
That is a potentially good move, as registering all FX trade on the system will enable the regulator to monitor the market and prevent capital flight.
What's not good, however, is that Nima took its time to become operational. The system was still in beta testing phase in March and was officially scheduled to be launched on Monday by First Vice President Es'haq Jahangiri.
The delay did its part in sowing confusion and there would be a lag before businesses adapt to working with it. It goes without saying that confusion has never done markets any good.
> Lead Exports Restrained
The turmoil has impacted other metal markets as well.
Major exporters in Iran have curtailed operations since last week after the country’s rial currency fell to an all-time low against the US dollar, market sources told Metal Bulletin.
The wild volatility in currency movements and uncertainty over future rates have meant lead exporters are restricting sales, market participants who source units from Iran told Metal Bulletin.
“Some 60% of Iranian exporters have adopted a wait-and-see approach because of the currency, while 40% are still exporting but not at the usual pace or volume,” a major trader said.
Producing 69,499 tons of secondary lead and 68,100 tons of primary lead in 2017, Iran is a major exporter of the commodity to India and Southeast Asia, although brands from the country traditionally achieve some of the lowest premiums in the market.
Premiums for 99.97% purity secondary lead ingots are currently unchanged at $30-50 per ton basis, CIF India and $50-70 per ton basis, CIF Southeast Asia.
Spot demand remains unspectacular against the good availability of units, several sources in the region said.
But traders who usually sell Iranian lead into the Asian markets could look to cover from elsewhere.
Currently, premiums for Australian and Korean lead ingots are offered up to $50 higher than spot market levels, although market buyers prefer to purchase cheaper Iranian material when available.