The billet in Iran is currently in a very tight situation as regards supplies. State-owned Khouzestan Steel Co., which is the country's sole producer of semi-finished products (billet, bloom and slab), has a capacity about 2.2 million mt per year and only supplies its products to other state-owned mills. Nowadays CIS countries are the sole source of billet and other semi-finished materials for Iranian privately-owned re-rollers, which altogether have a capacity of about 10 million mt per year. However, the rising demand for finished steel in the local markets of the CIS countries (especially in Russia and Ukraine) has already caused reduced export volumes of semi-finished products from the CIS to Iran as local producers prefer to roll finished steel to satisfy the domestic market instead of exporting semi finished steel; meanwhile, Iranian re-rollers and traders are also suffering from shortages of financial resources. These two factors mean that Iranian traders or re-rollers are unable to import sufficient quantities of semi-finished material (billet in particular), which in turn means they are unable to work at full capacity. This situation is against a background of high demand for finished products (with rebar to the fore) in the local Iranian market as well as in neighboring countries.
The most recent CIS billet offers to Iran were at a level of $1,100-1,120/mt CFR Iran's Caspian Sea ports. However, most traders expect higher prices when the CIS suppliers enter the market in the coming one to two weeks. As a price indication, it is heard that CIS suppliers are currently mentioning levels $50-100/mt higher compared to the abovementioned range; however, these are not formal offers. In the meantime, Iranian billet traders prefer to close for sales and keep their material in stock as they look forward to higher profits in a flourishing market.
Iran imported about 10 million mt of steel in the last Iranian year (21.03.2007-20.03.2008), of which billet accounted for about four million mt, i.e. a 40 percent share. Most steel market experts are expecting an even higher volume of steel imports, and of billet imports in particular, in the current Iranian year. A number of steel projects with a total capacity of 4-5 million mt of crude steel will be completed in the current Iranian year, but it will take the plants in question at least two to three years to meet full capacity.