Razieh Ahghaghi: The trading ring of the Commodity Exchange and the open market of ingots and steel products has witnessed unprecedented inflammation in recent weeks. While experts assess the role of exchange rate increases in the occurrence of these significant inflammations, market participants believe that the instability of the supply of ingots in the trading ring of the commodity exchange has had a significant impact on price increases. On the other hand, these two groups of producers active in downstream industries are also dissatisfied with the non-observance of the supply floor by the middle part of the chain (ingots) and believe that reduced supply has caused shortages in the market and downstream industries to buy ingots in the open market at high prices. they have to.
The calculated statistics also indicate the fact that the level of competition for the purchase of ingots has also increased. But in the meantime, steelmakers also offer their reasons for reducing the supply of ingots. Ali Mohammadi, CEO of Khuzestan Steel, as the largest producer of ingots in Iran, says: “On the one hand, all steelmakers expect to stabilize the domestic market by increasing the supply of ingots in the trading ring of the Commodity Exchange, and on the other hand, given the currency conditions, it is expected that With the growth of exports, we will have more currency. Explaining the roots of the steel market crisis, he explains: “The price of domestically supplied steel ingots is much lower than the world price of this commodity. There are many applicants in this market, so the more supply there is, the more demand there is.” He emphasizes: Achieving balance is not possible in these circumstances. The Market Regulation Headquarters and the Ministry of Silence should not think that the market shortage can be overcome by putting pressure on a few companies. Read the interview with Ali Mohammadi, CEO of Khuzestan Steel.
How is the supply of steel ingots from steel companies in the trading ring of the Commodity Exchange determined? Is there a legal requirement for supply?
The supply floor of each production unit is always determined by the upstream organizations, including the market regulation headquarters, and is announced to the producers. Companies also adjust and execute the supply in the coming weeks according to this plan; So that finally the supply of their product within a month is determined according to the supply floor. According to the regulations, production units must comply with the amount of floor set for supply on the commodity exchange according to the program of the market regulation headquarters.
So what has made it difficult to achieve this goal?
Manufacturers of steel ingots are currently facing the problem of conflicting expectations of exchange rates and meeting domestic demand. That is, while steelmakers are expected to increase the exchange rate by increasing exports, they are also expected to meet the needs of the domestic market. The sum of such a contradiction, while impossible, also disrupts the plans of the complexes.
How reasonable do you think the supply floor set for steel ingot producers for supply in the commodity exchange ring is?
The amount of supply floor set for companies is not logical in two ways. The first aspect is discrimination and the difference between the supply requirement of manufacturing companies, while since 1997 Khuzestan Steel has been obliged to offer 60% of its ingot production in the commodity exchange, while other steelmakers offer only 20 to 30% of their products in the trading ring Goods have been required. Another issue concerns the total supply, which is beyond the total needs of the market. While it is claimed that the supply of ingots in the commodity exchange is low and does not meet the needs of the market, but we believe that this is not the case and the abnormal increase in demand due to price rents is hidden in the supply of steel. Efforts have been made to address these issues over the past two months. Note that increasing the supply in the domestic market leads to a decrease in the export potential of producers and ultimately to the detriment of the country’s interests.
To what extent has the growth in the price of bullion trading on the Commodity Exchange in recent weeks increased the desire of steel producers to supply the domestic market with respect to exports?
Naturally, the realization of the price in the trading ring of the commodity exchange increases the tendency of steelmakers to offer the product in the commodity exchange. Although the price of ingots in commodity exchange and open market transactions has increased in recent weeks, but since the supply of this product from the domestic market is still much cheaper than its import, there is still a demand for brokerage intermediaries for ingots.
That is, if the price becomes real in the domestic market, will your supply increase?
Note that even if the price of ingots in the trading ring of the Commodity Exchange equals the export price, including the currency, steelmakers will not be able to offer their entire product in the domestic market; Because according to the currency conditions of the country, a part of the products should be allocated for export and its currency should be returned.
With this in mind, what program do you think the Ministry of Industry, as a policy maker, can consider to regulate the domestic and export sales of steel companies?
Fortunately, today some officials of the Ministry of Silence are aware of the importance of exports, planning and marketing, and do not allow the long-term export planning of producers to fluctuate as in previous years. But there is always the fear of export bans for production units, especially in companies with export infrastructure. These companies have been spending years building export infrastructure, and any ban could hurt them and their long-term export plans.
Steelmakers established near the high seas have made significant investments in exports and have been building export networks in recent decades. Requiring these companies to supply domestically means wasting these export funds In this situation where the production units are required to be offered in the domestic market, if the prices are the same as two months ago, the producers will suffer greatly and the profit of this chain will go to the pockets of the brokers’ brokers.