Local Flat Steel Producers Helpless Against Imports

The Iranian steel market’s demand for flat products is being met through imports, as local producers operate below production capacity.

Stating the above, Seyyed Reza Shahrestani, a member of Iranian Steel Producers Association, added that close to 2.5 million tons of coated, cold- and hot-rolled coils were imported in the last Iranian year (ended March 20, 2017), IRNA reported.

“The steel production chain is currently unbalanced, as slab production capacity was boosted by 2 million tons last year, exceeding local demand, while flat-starved downstream users have to turn to imports,” he said.

“We are unable to produce only about 700,000 tons of the imported flats, which are made up of specialized products. We have the required production technology and capacity for meeting the rest of local demand.”

Shahrestani believes that the capital spent on flat imports must be allocated to reviving underperforming mills grappling with financial problems due to the banking system’s limited lending ability.

According to ISPA, imports of semis and steel products stood at 187,000 tons and 2.91 million tons last year, indicating a 44% rise and a 31% drop respectively.

Less than 3-mm HRC was the main imported product with 1.28 million tons, down 36% year-on-year. It was followed by cold-rolled coil with 617,000 tons, more than 3-mm HRC with 366,000 tons and coated coils with 350,000 tons.

Another reason why flat imports continue unabated is the downtrend in the global flat steel market, according to Metal Bulletin.

Chinese suppliers, under pressure from unfavorable conditions in their local market, have significantly reduced their export prices in recent weeks. The lower prices have attracted attention in the Iranian market, making imports profitable again despite relatively high Iranian import duties.

HRC and CRC are subject to 20% import duty in Iran. Duty for hot dipped galvanized coil is at 26%.

These duties were expected to be halved as of the beginning of the current Iranian year (started March 21). However, no decision on this has been announced yet by the Iranian government.

  Price Decline, Stronger Euro

Buying activity in the Iranian flat steel import market was rather limited last week due to the downward price trend seen in the major supplying markets, Metal Bulletin reported.

The Iranian week starts Saturday and ends Friday.

However, the revaluation of euro seen in the past couple of weeks has made imports from the Commonwealth of Independent States, which is the largest flat steel supplier to this destination, more expensive for Iranian customers.

“Clients are delaying their decisions due to the increased euro rate and falling market, and therefore put everything on hold [as regards] new CIS-origin hot- and cold-rolled coil purchases,” one trader said.

Russian steelmaker MMK offered 2-mm HRC at €415 ($451) per ton FOB Astrakhan, sources said.

The estimated cost of freight to the northern Iranian port of Anzali varies around $12-20 per ton, depending on the tonnage.

Nevertheless, the supplier was ready to provide significant discounts to €395-405 ($430-441) per ton FOB for firm bids, depending on the material size and tonnage.

One trader’s bid of €386 ($420) per ton FOB has been rejected by the mill.

The same trader earlier purchased 15,000 tons of HRC from Kazakhstan’s ArcelorMittal Temirtau at $420 per ton FOB Aktau.

The cost of freight for this tonnage was $8 per ton, the source said.

Recent offers from the mill were heard at $430 per ton FOB Aktau.

The estimated cost of freight for smaller tonnage of material is around $15 per ton.

Offers of Chinese HRC were heard at $450-460 per ton CFR southern Iranian ports, but no deals were reported.

Metal Bulletin’s weekly assessment of import prices for 2-mm HRC in Iran dropped to $428-450 per ton CFR Iranian ports on May 10, from $446-475 per ton CFR the week before.

Its price assessment of cold-rolled coil imports in Iran dropped to $470-492 per ton CFR Iranian ports on Wednesday, from $500-527 per ton CFR the week before.

Offers from China were heard within the range of $490-500 per ton CFR southern Iranian ports. But these prices were considered to be too high by customers and were rejected.

Recent offers of Russia-origin material were heard at €440 ($479) per ton FOB Astrakhan.

A trader booked 10,000 tons of Russian CRC with a discount to €420 ($457) per ton FOB Astrakhan.

The cost of freight to the northern Iranian port of Anzali was said to be $12 per ton.

Metal Bulletin’s price assessment for imported HDG in Iran was $550-560 per ton CFR Iranian ports on Wednesday, falling from $562-570 per ton CFR the previous week.

Offers from China were heard within this range.

However, considering the high import duty of 26% in the country, no new bookings were heard.