Iran's domestic market for billets is getting tighter with domestic longs producers struggling to satisfy their needs in billets due to lack of availability of both domestic and imported supplies.
Iranian domestic longs producers are experiencing billet shortages since the domestic billet rolling capacity is not sufficient to satisfy the growing demand from longs producers. Longs rolling companies report that they have certain difficulties in buying domestically-produced materials since most of the domestic mills with full rolling cycle (vertically-integrated mills) use practically all the billets they produce, supplying to the market only a minor part of their production.
Meanwhile, availability of imported billets, primarily supplied by the CIS and China, may become scarce in the near future because of UN sanctions imposed on Iran. For instance, Ukrainian billet exports have already started to experience some difficulties after the Ukrainian cabinet of ministers adopted the resolution forbidding exports of any materials which might be connected to Iran's nuclear development program. Although billets are not directly related to the nuclear program, the government's new decision has negatively affected ex-Ukraine billet supplies to Iran, causing shipment delays and non-fulfillment of contacts.
Although domestic billets are offered very rarely to Iranian domestic longs producers, in general the price trend is stable for domestic billets. Recently, 40,000 mts of Khuzestan Steel Co. production 150 x 150 mm billets were sold to Iranian rolling mills at $571/mt ex-works, for late December delivery. However, the offers for the domestic market are very limited.
On the other hand, imported billets are being supplied from the CIS and China. The price of imported billets is growing steadily because of the worldwide billet price increase and the rising freight rates. Thus, according to reports from Iranian traders, ex-Caspian Sea freight rates are up by about 20 percent, i.e. to $65-75/mt for billets from Ukraine and to $20-25/mt for Russian origin products. The most recent billet offers ex-CIS are at $575-580/mt CFR Anzali port level for December shipment. Meanwhile, the quotations of Chinese origin billets are even higher due to the Chinese government's cancellation of the VAT rebate on exports. On the other hand, the availability of Chinese origin products is very limited due to high domestic demand.