The Islamic Republic’s steel segment is seeing new heated disputes as the local government plans to revise price formulas for raw materials. While miners hope to receive additional funds for investments, steelmakers see a threat to their competitiveness and anticipate increase in cost.
The Ministry of Industry, Mine and Trade is considering to raise the coefficients in local price formulas for raw materials based on quarterly weighted average domestic and export sales price for billet and slabs from Khouzestan Steel Company. The current figures are 16.5% for concentrate, 23.5% for pellets and 50% for DRI. The representatives of mining industry are asking to increase coefficients by at least 2%, while steel producers are opposing. “There was a meeting regarding this issue on April 14. However, the parties did not come to any conclusions. It was decided that a deeper study is required to reach an agreement,” a representative of the Iranian Steel Producers’ Association told Metal Expert.
The steelmakers’ main argument in this dispute is the additional cost, which will result in narrowing export opportunities. Taking into account that most market players are limited by US sanctions and the global recession, the decision to raise coefficient would only lead to negative consequences. “It is not a good idea to implement such decision at present as Iran is under pressure of the coronavirus epidemy and the outbreak worldwide. Billet prices have dropped sharply and by the middle of May they can weaken more. So, it’s very tough time for Iranian steelmakers and this increase should be postponed till the beginning of 2021, otherwise steel export will reduce,” steel market analyst Keyvan Jafari Tehrani told Metal Expert.