Reduced billet suppy and other factors to ensure continued rise of Iranian rebar prices

Wednesday, 16 April 2008 13:14:39 (GMT+3)   |  
       

Rebar prices have been soaring in the Iranian domestic market during recent days and even further price increases are expected by traders. The rebar prices for 12-25 mm sizes have already reached a level of $1,160-1,180/mt ex-stock Tehran, while they stood in a range of $1,150-1,160/mt last week.

The Iranian government is currently discussing a possible reduction of the customs duty on rebar and other steel products. Some reports imply that the Iranian  government will reduce the customs duty on rebar to 15 percent, down from the current 20 percent. Such reports were responsible for a downtrend in the rebar market at the end of last week but this was just a temporary correction which failed to continue for more than a few days. Both the soaring price of billet in the global markets and the high demand in the local market have ensured the continuing strength of Iran's domestic rebar market.
 
Iran's private-owned rolling mills, which have already claimed a considerable share of the Iranian rebar market, are entirely dependent on billet imports. The country's private-owned mills have a total designed capacity of six to seven million metric tons per year while their actual combined output doesn't exceed 1.2 to 1.5 million metric tons a year. These mills mainly  import billet from CIS countries via the Caspian Sea and so global prices of billet have a direct influence on their sales prices. Iran's private-owned mills constitute one of the main groups protesting against any possible government move to reduce the customs duty on rebar, as they will be unable to compete with imported steel if the government goes ahead with such a measure. 
 
Meanwhile, the Iranian authorities usually try to exert control over domestic rebar market prices by controlling the sales and prices of state-owned plants while they also try to influence market prices by importing rebar. However, rising demand for steel in the CIS countries has reduced that region's billet export volume during recent months, which means that demand for billet in Iran exceeds supply at present. Besides, the UN sanctions against the Iranian nuclear program has already imposed strong restrictions on the international transactions of Iranian banks. Furthermore, there is a high inflation rate of about 25 to 30 percent in Iran (the official inflation rate is about 19 percent). All of the abovementioned factors along with some others have created a very difficult market situation for rebar and other products in Iran. In this context, most traders expect higher prices for rebar and other finished steel products in the future.    


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