US tightens economic sanctions on Iran, steel export volumes to drop further

“Today’s action includes the designation of 50 Iranian banks and their foreign and domestic subsidiaries,” the US Treasury Department announced in its report on Monday, along with “the identification of more than 400 targets, including over 200 persons and vessels in Iran’s shipping and energy sectors.”

Although the move is now largely directed at the country’s oil industry and banking system, it is still expected to aggravate the situation in the Iranian export steel market, which had already been struck by the previous set of sanctions imposed by US President Donald Trump’s administration in early August.

“The Iranian market is almost closed now, and banking issues are not the biggest problem here,” a Middle East-based source told Fastmarkets.

Shipping problems are the major issue at the moment because almost no company wants its vessels to call at Iranian ports, the source added.

“Mills still offer and you can book, but it may happen that you will never ship the material,” he said.

In such conditions, Iranian steel exporters had to cut prices significantly to attract customers and to compensate for the risks involved in trade with the country.

Fasmarkets’ weekly assessment for the Iran export slab price was $420-430 per tonne fob Iranian ports on November 7, down by $30 per tonne from $450-460 per tonne on October 10.

Fastmarkets’ weekly price assessment for Iran export billet was $430-435 per tonne fob Iranian ports on November 7, down $30 per tonne from $460-465 per tonne on October 10.

Lower prices helped Iranian exporters win some contracts. In particular, several cargoes of billet were reported sold to the Gulf Cooperation Council region, North Africa and Southeast Asia at $430-435 per tonne fob over the past seven days. This is down by $5-10 per tonne from the previous bookings price.

“I thought that no one would want to buy Iranian billet after the tightening of sanctions, but I started to receive inquiries for 30,000-50,000 tonnes from customers in the GCC region,” one trader said, adding that this included $30 per tonne freight and $5 per tonne extra expenses for trader’s margin and bank charges.

The price of Iranian billet totaling $465-470 per tonne cfr is still the most attractive option for customers in the United Arab Emirates.

“CIS billet at $460 per tonne fob Black Sea plus $45 per tonne freight would be $505 per tonne cfr in the UAE, while the recent rebar price heard in the UAE domestic market is $510-515 per tonne ex-works,” the trader said.

“With the re-rolling cost of at least $20 per tonne, using CIS billet would mean working with losses so, despite sanctions, customers in the GCC region will find a way to buy Iranian material as they need to cut rebar production costs,” the source added.

Nevertheless, the source believed that steel export volumes from Iran, of semi-finished products in particular, will keep falling this year.

Over the first six months of the current Iranian year (March 21 to September 22, 2018) the country’s semi-finished steel exports dropped by 11.7% year-on-year to 2.79 million tonnes, according to the Iranian Steel Producers’ Association (ISPA).

Of that volume, 1.55 million tonnes consisted of billet exports. This quantity was unchanged year on year, while slab exports dropped by 23% to 1.24 million tonnes.

Major outlets for Iranian semi-finished steel are Southeast Asia (Thailand and Indonesia in particular), the GCC region and North Africa.

Iran’s finished steel exports, however, surged 138% to 1.37 million tonnes over the first six months of the current Iranian year, according to the ISPA. Of those exports, 637,000 tonnes was made up of various types of rebar, mostly sold to neighboring Iraq and Afghanistan. Rebar exports more than doubled year on year from 278,000 tonnes a year earlier.

Meanwhile, export volumes for hot-rolled coil (HRC) totaled 426,000 tonnes in the Iranian year to date, up almost three times from 156,000 tonnes during the same period last year.

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