Market participants have been evaluating the influence of the new sanctions announced by the US against Iran on Friday, January 10. The escalating trade tensions between the two countries have already resulted in a slowdown of trading of ex-Iran semis in its main market, Asia, and customers have switched to other sources. But most sources believe that sales from Iran will revive in the foreseeable future and that the overall impact will be short-lived, sources told SteelOrbis.
Asian customers prefer billet of other origins
Most billet and slabs customers in the Asian region have postponed purchases from Iran, saying that the risks have increased due to the new sanctions. Nevertheless, there have been no reports of cancelations of previously booked cargoes, SteelOrbis has been informed. Traders have been offering ex-Iran billet at $430-435/mt CFR Southeast Asia recently, almost in line with the level announced in early January. “No one [among traders] told customers about any problems. Maybe they don’t want customers to worry at this stage,” a source said.
“The political volatility has made customers more reluctant to buy: they are asking for risk premiums and therefore diverge to Malaysia and India,” another source stated, commenting on the situation in the billet segment. According to SteelOrbis’ information, more than 10,000 mt of ex-Malaysia billet have been sold to Indonesia at $440/mt CFR recently, an Indonesian customer confirmed. The Indian mills closed a tender at $423/mt FOB late last week, with the freight to Asia assessed at $20-25/mt, but the identity of the buyer is unknown so far.
Buyers seek large discounts on ex-Iran slabs
Ex-Iran slab sales have also been impacted. According to sources, the latest offers have been heard at $450/mt CFR Southeast Asia. Customers have been reluctant to buy ex-Iran slabs, asking for discounts of about $15/mt because of the higher risks, but Iranian suppliers have been not ready to agree to this. There are a limited number of slab consumers in Asia and they prefer to be cautious in their purchases.
As long as the gap between slab and HRC prices in Asia is big enough, customers will prefer slab of other origins.
Trading with Iran expected to resume soon
Most Asian sources believe that the new US sanctions will influence the trading with Asia only temporarily. “We don’t understand the difference between the old and new sanctions, so there will be no effect [in the trading in the future],” a Southeast Asian billet buyer said. Another source said that the offers are still coming and the trade flow has not been hurt much compared to the previous round of sanctions, and so trading with Asia will resume in the coming months.
Nevertheless, the current slowdown of sales of ex-Iran semis will lead to an overall increase in prices for imported billet and slabs in the region. Most offers for billet for other origins have been at $450/mt CFR and higher, while slab offers have been at $455-460/mt CFR Southeast Asia. “The price is important. Some customers in Indonesia and Thailand just cannot pay [such price offered from non-Iran suppliers],” a trader said.
Companies included in new sanctions list
The US Department of Treasury has stated that the new sanctions target the 13 largest steel and iron manufacturers in Iran, in particular Mobarakeh Steel Company, Saba Steel, Hormozgan Steel Company, Esfahan Steel Company, Oxin Steel Company, Khorasan Steel Company, South Kaveh Steel Company, Iran Alloy Steel Company, Golgohar Mining and Industrial Company, Chadormalu Mining and Industrial Company, Arfa Iron and Steel Company, Khouzestan Steel Company and Iranian Ghadir Iron & Steel Co.
Moreover, some foreign companies, which were dealing with trading or transportation of Iranian materials, will be affected, namely, Oman-based Reputable Trading Source LLC, Beijing-based trading company Pamchel Trading Beijing Co. Ltd. and China’s Hongyuan Marine Co. Ltd.