Iranian long market expected to rebound in spring

The cold winter weather conditions and the accompanying seasonal stagnation in the construction sector have naturally reduced the demand for steel and negatively effected market prices. Consequently, it is not surprising that debar and I-beam prices in the Iranian market are in a downward trend. This has been the case with regard to I-beam for three months now, while the decline in debar prices began just one month ago. In contrast, during the peak months of last summer (2006), the Iranian market had seen a very high price of $900-1,000 per ton for I-beam. To counter such a rise in prices, the Iranian government decided to implement zero custom duties for the said product. At the same time as the subsequent downward slide in I-beam prices, October and November saw, debar prices jump to over $750 per ton. The plans of the Iranian government to provide financial support for the Iranian private sector rolling mills will have an important effect on the future debar market. The rolling mills which at present use just 30 percent of their combined designed capacities (five million tons per annum) are expected to receive bank loans worth $100-150 million. This credit will enable the rolling mills to import billets from the CIS or China and to achieve higher production figures. Naturally, the resulting increase in supply will cause a drop in the market price. In the meantime, the Iranian authorities are continuing discussions regarding a possible cancellation of customs duties for billet and other semi finished products (already at four percent) for the coming Iranian business year (i.e. from 21.03.2007). However, the Iranian authorities have already a 20 percent customs duty in place to encourage higher debar production by the private sector rolling mills and to prevent imports of finished debar. In spite of all the preparations for a higher supply of constructional steel sections, there are some parameters which may force a rising trend in prices for the coming spring. Real estate prices have risen between 30 and 35 percent over the last six months in Iran. This will definitely cause greater investments in building projects and consequently a higher demand for steel in the coming spring .On the other hand, the reconstruction of Iraq, Afghanistan, and Lebanon will also require a lot of construction steel, and this will affect the Iranian market due to Iran's proximity and the easy access of those countries to Iran. Meanwhile, the high price of oil has caused the Iranian government along with other Persian Gulf countries to launch many industrial and construction projects, all of which require construction steel. In brief, we can expect a rising trend in the Iranian steel market for the coming spring (approx. April 2007) though stagnation continues for the moment.