Rebar prices are still on the way down in the local Iranian market after registering a brief pause in the last two weeks. Currently 12-25 mm rebar sizes are changing hands at $980-1,000/mt for immediate delivery on ex-stock Tehran basis. Rebar prices have seen some fluctuations in recent weeks in the local Iranian market though the general trend has been down. One week ago domestic market rebar prices - under the same terms as above - stood in a range of $1,030-1,050/mt, while they were in a range of $1,070-1,090/mt two weeks ago.
Most local traders in Iran, considering both local and international developments, expect to see further price reductions for rebar in the local market. As a result, the majority of buyers are standing aside from the market and are waiting for prices to hit rock bottom. The current volume of demand in the local market has declined substantially and so some sellers are even accepting deferred payment while they had insisted on cash payment just a few months ago when the market was flourishing.
In recent weeks the Iranian government's VAT implementation policy created a rising trend in the local steel market, as it did in other sectors of the Iranian economy. However, the trend in question was temporary as the Iranian authorities suspended the VAT regulation after large strikes, protests and other disturbances.
Iran's state-owned steel plants produced about 1.6 million mt of rebar in the first six months of the current Iranian year (i.e. in 21.03.2008-20.09.2008), which is about full capacity for the mills in question. Meanwhile, the Iranian government is selling iron ore or semis to these state-owned plants at prices significantly lower than global levels.
The Iranian private sector rerollers, which have a combined capacity of 10 million mt per year, are unable to use more than 30-35 percent of their capacity due to shortages of billet and finance. The Iranian private sector rolling mills which are fully dependent on imported billet have already incurred heavy losses as they have had to sell rebar at prices lower than those at which they bought in billet supplies a few months ago. Given the extent of their losses, the private sector rerollers have asked the Iranian government for financial support and also for time extensions for payment of their debts to local banks.