Higher billet demand from Iran supports Turkish market

Prices in the Iranian domestic market have seen gradual increases due to international sanctions against the country, with increased difficulties experienced in importing steel. Generally meeting its steel billet needs from Russia and Turkey, Iran has lately faced difficulties in steel billet import activity from Russia and has thus turned to Turkish origin steel billet, for which payment by letter of credit is possible. Besides, billet demand from small scale rolling mills and traders in Iran has increased lately.
 
The free exchange market for the US dollar in Iran has resembled a sort of black market for quite some time now, while the US dollar exchange rate has been increasing gradually in the free market for a long time. However, the Iranian central bank is providing foreign currencies to importers at levels quite below the free market levels. Thus, the importance of trade via letter of credit emerges at this point. Although Turkey has been selling steel billet to Iran in smaller tonnages for cash payments for a long time, the usage of letters of credit clears the way for larger volume bookings and provides the opportunity for Iranian importers to close these transactions at foreign currency exchange rates significantly below free market levels.
 
Turkish billet sales to Iran in smaller tonnages and for cash payments were concluded at the price range of $580-590/mt ex-works last week. Moving to this week, Turkish mills' billet offers have increased by about $5/mt to $585-595/mt ex-works.
 
The increase in Iranian billet demand and the possibility of payments via letter of credit will help the Turkish steel billet market to maintain its strength. However, it is unclear how long Iran will stay in the market, as it is not beyond the bounds of possibility for it to disappear from the market suddenly.