Prices in the Iranian domestic market have seen gradual increases due to international sanctions against the country, with increased difficulties experienced in importing steel. Generally meeting its steel
billet needs from
Russia and
Turkey,
Iran has lately faced difficulties in steel
billet import activity from
Russia and has thus turned to Turkish origin steel
billet, for which payment by letter of credit is possible. Besides,
billet demand from small scale rolling mills and traders in
Iran has increased lately.
The free exchange market for the US dollar in
Iran has resembled a sort of black market for quite some time now, while the US dollar exchange rate has been increasing gradually in the free market for a long time. However, the Iranian central bank is providing foreign currencies to importers at levels quite below the free market levels. Thus, the importance of trade via letter of credit emerges at this point. Although
Turkey has been selling steel
billet to
Iran in smaller tonnages for cash payments for a long time, the usage of letters of credit clears the way for larger volume bookings and provides the opportunity for Iranian importers to close these transactions at foreign currency exchange rates significantly below free market levels.
Turkish
billet sales to
Iran in smaller tonnages and for cash payments were concluded at the price range of $580-590/mt ex-works last week. Moving to this week, Turkish mills'
billet offers have increased by about $5/mt to $585-595/mt ex-works.
The increase in Iranian
billet demand and the possibility of payments via letter of credit will help the Turkish steel
billet market to maintain its strength. However, it is unclear how long
Iran will stay in the market, as it is not beyond the bounds of possibility for it to disappear from the market suddenly.