In its latest move to stabilize steel prices, the Securities and Exchange Organization (SEO) has announced that the base price for steel products would be set as per the average prices by the end of trading days, Fooladnews reported.
The decision was made following a proposal by the Iron-Suppliers Union, aimed at eliminating the middlemen and intermediary traders. Since three years ago, middlemen have been dominating the iron sector at the Iran Mercantile Exchange (IME) mainly due to the limited supplies. Therefore the SEO decided to regulate the market by allowing only the legal entities licensed by the Iron-Suppliers Union to participate in the steel products’ trade.
Now, minority shareholders and individuals can once again trade in iron and steel products at the IME. Their return also partly due to the sharp decline in the domestic demand—caused by the slowdown in the housing market—which has pushed the middlemen to the corner.
Regardless of the reason for their comeback, ordinary traders are now relieved that prices would be transparent and demand and supply would be closely supervised by the IME. This will hopefully prevent middlemen from dominating the market and creating monopolies.
The new mechanism introduced by the SEO will facilitate direct producer-to-consumer supply chain without the presence of middlemen. If the consumers of steel products can buy goods such as rebars and beams directly from the IME, it would not only reduce the costs, but also substantially increase demand in both upstream and downstream sectors of the steel industry, said the managing director of Esfahan Steel Company, Ardeshir Sa’d-Mohammadi.
Managing director of the IME, Hossein Panahian supports the idea, saying the move would help establish market equilibrium and reduce the steelmakers’ worries regarding the disruptions in supply and demand. Another positive result of the decision, he points out, is that this way, the prices of steel products can be determined through fewer offers, as the official prices will be announced at the beginning of each trading day.
Last Sunday, copper, steel, and aluminum started to be traded at the IME based on the approved prices, bringing hopes to steel market players including the manufacturers and the marketers of better days ahead. Trade volume and prices had experienced significant decline during the past Iranian year (ended March 20, 2014). After the current year began on March 21, analysts and market experts hardly predicted that prices would continue to drop and that recession in the steel market would continue unabated.
Only a short period in the current year witnessed growing trends in steel prices and trade volume and that too was not ignited by actual increase in demand but rather by certain factors including growth in the current expenses and the increase in value-added tax (VAT) to 8% from the previous 6%. Steel trade volume has been particularly lower in the current year compared with the previous year with 8.75% decline in the total volume of trades.
