Economy, Business And Markets

Steel Market Calm, Hibernating

Steel Market Calm, Hibernating
Steel Market Calm, Hibernating

The domestic steel market experienced modest fluctuations during the week ending November 6, mainly as a result of the cold weather covering many parts of the country, reported Fooladnews.

During the week, prices for iron rods (rebar) of size 14 averagely stood at 18,400 rials, while light and heavy girders’ prices had almost no fluctuations compared to last week. Most steel products at the entry points also achieved price stability. The Iran Mercantile Exchange (IME), as the official marketplace for steel products, witnessed the same situation with no significant offers except for Sunday when a few commodities were offered by Esfahan and Khuzestan steel companies.

During the last five days of the week, as much as 95,840 metric tons of different steel products were offered and the trade volume reached 140,780 tons, thanks to a 45,000-ton offer of steel sheets by Mobarakeh Steel Company.

A close inspection of the market during the past few months helps the analysts forecast more gloomy days for the domestic steel market. According to an analysis by Donya-e Eqtesad, the current situation in the market prevents one from expecting improvement and a positive change in the market until the end of the current Iranian calendar year (March 20, 2015).

The stagnation in Iran’s housing and construction sectors during the past two years has had a devastating impact on steel producers. Another blow to the economy was due to the international sanctions imposed by Western countries over Tehran’s nuclear energy program, which has affected the steel market as well as other commodity markets.

Since President Rouhani took office in August last year, his economic team made concerted effort to pull the economy out of recession. The interim nuclear deal between Iran and the P5+1 group of major world powers in November last year has helped the administration to bring the inflation under control, though the industry sector is still expected to experience standard levels of growth after years of immovability.

One of the recent decisions made by the government to boost the steel industry is the $3.2 billion of loans to be offered for development projects.

The National Development Fund of Iran (NDFI) announced Saturday that legal entities and individuals in certain regions could receive loans of 50 billion rials ($1.87 million based on government exchange rate) and 20 billion rials ($748,362), respectively, if they propose economical development plans and projects in steel sector.

The amount of loans for underdeveloped regions would be $375,000 and $75,000 for legal entities and individuals, respectively. In line with supporting the private sector, the NDFI says the projects could receive the loans only if the shares of state-owned organizations, including the Iranian Mines and Mining Industries Development and Renovation Organization’s (IMIDRO), in projects do not exceed 20%. IMIDRO, as the major state-owned holding company active in the mining sector, aims to optimally develop and exploit the metal and non- metal mining reserves, as well as to renovate the mining industries. The policy is pursued in order to minimize the government’s role in industrial projects and to encourage the private sector investors to finance the projects.

For the current Iranian calendar year, the NDFI has allocated more than $22 billion in loans to the private sector or joint ventures of private sector and the government, Mohammadreza Shojae’dini, investment deputy at NDFI told Fooladnews.

NDFI also announced that the interest rate for underdeveloped regions and provinces would be 4% lower, while the rate in developed regions would reach 19%. If the loans are paid in foreign currency, the interest rates would be 6% and 4% in developed and underdeveloped regions, respectively.

The administration, and in particular the ministry of industry, mine, and trade is doing its best to prepare the ground for the improvement of the domestic steel sector so that the 20-Year Vision targets could be achieved. Based on the plan, Iran should produce 55 million tons of crude steel by 2025. The ambitious goal comes as the current annual steel output hardly reaches 20 million tons.