The Iranian HRC market has been characterized by instability in recent weeks, both as regards domestic and imported products, thanks to low inventory and certain financial restrictions imposed on Iranian banks by the UN.
Earlier this week 2-12 mm thick HRC, which is mainly produced by Mobarakeh Steel Co., had already increased to $810-835/ mt ex-warehouse Tehran.
Meanwhile, Mobarakeh sold about 37,000 mt of HRC at the beginning of the current week through the Tehran Mercantile Exchange. The sold lot consists of 8,000 mt of 1-12 mm HRC, sold at the price of $764-798/ mt ex-works for delivery in one week's time, and of 29,000 mt of 4-8 mm HRC sold at the price level of $746/mt ex-works with delivery in 60 days. These prices represent an increase compared with the previous sale of supplies on December 10, 2007.
HRC in Iran is mainly produced by Mobarakeh, which has a capacity of 4.5 million mt per year . However, because Mobarakeh usually assigns a large part of its output for export delivery, the Iranian domestic market comes under strong pressure and has to resort to imports in order to satisfy domestic demand. For instance, Iran imported 836,000 mt of HRC (mainly from the CIS) during the last Iranian year 1385 (21.03.2006-20.03.2007), while Mobarakeh exported about one million mt during the same period. Local purchasers of HRC (mainly pipe and profile producers) usually claim that Mobarakeh's exports cause some deficit in the local market, thereby causing prices to increase. Mobarakeh has reduced its exports by half during the current Iranian year 1386 (21.03.2007-20.03.2008) due to pressure from domestic buyers.
Meanwhile, quotations for HRC imports have also increased recently due to the high demand in Iran, due to the rising freight rates, and also thanks to the increasing risks involved in supplying to the Iranian market (most banks do not accept Iranian L/Cs). As a result of the UN sanctions, Iranian traders have been forced to buy HRC cash in advance, and this naturally places a very great financial pressure on the consumer and influences their import costs substantially. The level of increase in the prices of HRC imports depends on the quality and on the origin of the products. Given the fact that in the first half of the current Iranian year, the country imported about 350,000 mt of HRC, we can expect imports of 700,000 mt for the whole of year 1386, showing a 20 percent decrease as compared to the last Iranian year (about 836,000 mt of HRC imports).
However, due to the fact that local demand has increased by at least 15-20 percent in comparison with last year due to the launch of a number of development and construction projects, a new surge in the HRC market demand, and consequently an increase in supply scarcity, may be seen by the end of winter as construction activities begin to revive.