CIS steel suppliers are already offering billet to Iran at prices a little lower than $1,000/mt, i.e. in a range of $970-980/mt, on C&F Iranian south Caspian Sea ports basis. Most local traders who import billet and sell it to local rolling mills have already closed their billet sales since prices are climbing with each passing day and they expect prices to continue to move higher and higher. As a result, the market for billet has become very tight with a lot of buyers but with no sellers in sight.
The CIS countries, and Russia in particular, are the main suppliers of billet to the Iranian market, facilitated by Iran's south Caspian Sea ports which provide foreign suppliers with easy access as well as low freight rates in comparison with other Iranian ports. 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 4.2 million mt.
There is currently very strong demand for billet in the Iranian market as private-owned rolling mills have already installed a total rolling capacity of about seven million mt and around the same capacity again is under construction. Meanwhile, some state-owned mills also need to import billet or other semi-finished products from CIS countries. The private-owned rolling mills are fully dependent on billet imports, as Khuzestan Steel Co. (capacity of 2.2 million mt per year) is the sole Iranian state-owned supplier of semi-finished products (billet, bloom and slab) but is unable to meet market demand. There is an actual annual demand of about seven to eight million mt of billet in the Iranian market which neither local suppliers nor imports are able to meet satisfactorily.
Private-owned rolling mills are the main importers of billet in Iran, but they are unable to purchase sufficient quantities of billet and naturally cannot operate at full capacity due to their tight financial situation, especially when billet prices have doubled in recent months. A shortage of billet in the global markets is another factor which has tightened the Iranian billet market and hindered private-owned mills from running at full capacity. On the other hand, UN sanctions targeting Iran's nuclear program have blocked international transactions by Iranian banks, which means billet importers are obliged to buy material by cash or via foreign banks, both of which entail higher costs.