First Vice President Es'haq Jahangiri instructed Mohammad Nahavandian, the veep for economic affairs, to revise rules set for regulating trade in steel products.
In a letter published on Monday, Jahangiri said the mechanism needs to be revisited in a way that "it does not send a negative signal to the bourse."
The emphasis reflects concern that the potentially adverse steel pricing decision is undermining the stock market already in turmoil, which observers say is a “victim” of unhelpful government intervention in pricing products of listed companies.
The letter was also in response to the criticism by Labor Minister Mohammad Shariatmadari who said the rules for regulating steel market are a bane for the equity market and steel export, ISNA reported.
The Labor Ministry has portfolios including 20% of the total steel industry. The minister has said that listed steel companies constitute 15% of Iran's stock market value.
Criticizing guidelines governing the steel market, Shariatmadari said, "The rules not only hurt steel export but also the people's assets and their trust [in the stock market] that could be a recipe for social, economic and political unrest."
Criticism mounted in recent weeks against a controversial decision last month by the Industries Ministry to set a price ceiling for steel products listed at the Iran Mercantile Exchange.
Industries Minister Alireza Razm-Hosseini announced a policy that calls for “steel products to be sold at the IME at prices equivalent to 70% in the Commonwealth of Independent States (CIS) markets.”
The government plan to intervene in the market and control steel prices has become a hot debate among steel manufacturers, capital market authorities and government officials.
Opposite Effect
Policy and decision makers advocating such measures say it “reduces the final price of steel in the domestic market and supports end consumers.” But there are valid concerns that such moves in essence have the opposite effect and in the past filled the coffers of avaricious middlemen and gave rise to rent-seeking.
Capital market officials have regularly urged the government to stop intervening in pricing goods produced by listed companies. They argue that such rules are incompatible with the letter and spirit of competitiveness and market mechanisms where demand and supply determine prices.
Observers opine that shareholders will be hurt the most by the decision because it will negatively impact the profit margins of listed companies. Share prices, especially of commodity companies, have nosedived in recent trading with stakeholders and retail investors counting the cost.
The decision to set a cap on steel products and other moves reportedly pushed the managing director of the Securities and Exchange Organization Hassan Ghalibaf-Asl to resign last week.
It his resignation letter, submitted to the Economy Minister Farhad Dejpasand, Ghalibaf-Asl said his efforts to revive the struggling stock market were futile "due to politicized moves and intervention of non-professionals in the working of the capital market.”
