Detailed statement of the Iranian Steel Manufacturers Association regarding the supply of steel in the commodity exchange

According to Chilan’s report, regarding the recent issues surrounding the supply of steel in the commodity exchange, the Iranian Steel Manufacturers Association published a statement as follows:

🔻 Reducing the cost of housing in the country is a national mission on the shoulders of all officials, statesmen, producers and other sections of society. The duty of the steel industry in this movement is to ensure the sufficient supply of iron materials needed for housing construction, which, thank God, considering the possibility of producing about 2 times more steel compared to domestic needs, this task has been well achieved. Therefore, to whatever extent the honorable government or the private sector has a demand for steel for housing construction, it can be provided by the country’s steel producers, and by the way, the concern of the honorable authorities regarding the national housing movement should be directed to its other components, except for building materials such as cement and steel. .

🔻 Why is it necessary to supply steel in commodity exchange?
Before the establishment of the metal exchange in 2002, a company like Zob Ahan Isfahan (the largest producer of construction products at that time) sold every kilogram of steel products from the extraction and processing of iron ore and coal and transportation to the factory and production and payment of production costs and salaries. He received only 2,300 Rials as a salary, while the intermediary profit of selling these products in the market was equal to the factory’s selling price!
This injustice or the distribution of rent, which did nothing but weaken the financial base of the factory and strengthen mediation and rent-seeking, prompted the officials of the Ministry of Mines, Metals and Commerce to….

🔻 Achievements of steel supply in commodity exchange
• Discovering the fair price favored by the market with supply and demand mechanism
• Discovering the price of the market margin and preventing the distribution of destructive speculative rents and directing liquidity towards production
• Strengthening the financial base of producers and increasing the possibility of implementing development plans
• Encouraging the private sector to invest and strengthen the capital market
• Eliminating middlemen and reducing the price for the final consumer

🔻 Considerable aspects of steel supply in commodity exchange
Since 2017 and with the intensifying interference in the commodity exchange and changing the government’s expectations from the commodity exchange from the transparent price discovery based on supply and demand as a market regulation tool, not only the government’s targeting of steel pricing based on a fixed exchange rate (4,200 Tomans) It was not realized, but the functioning of the Commodity Exchange was disturbed by the issuance of unprofessional circulars and directives, such as requiring all steel producers, even small and medium-sized producers, to supply manufactured products in the Commodity Exchange at mandated prices.
A series of these issues, including the government’s insistence on the supply of all steel producers in the commodity exchange and its impossibility, have caused the penal cases to remain open for more than 162 steel factories in the country (more than 60% of the production units). Therefore, if the respected government intends to make a 180-degree turn in the positions of the last few years, it is necessary to first determine the assignment of these cases.

🔻 conclusion

The estimates show that the annual national housing demand is less than 10% of the country’s total steel supply, and therefore there is no need to use such anti-protection versions of production. It is enough to acquire one of the rebar and beam steel factories, whose major shares belong to the government or social security, in the area of providing steel and national housing, and provide the entire national housing needs with any mechanism that the government deems appropriate. /p>

The official statistics of the country show that in recent years, the increase in the price of steel has always been lower than the general inflation rate of the country, and specifically, during the first half of this year, the price of rebar in the commodity exchange has also decreased. has been found Therefore, the strange claim of increasing the price of steel due to the supply in the commodity exchange, causes the establishment of unpredictable mechanisms…

Given that about 70 kg of iron is used to build each square meter of housing and taking into account the daily price of rebar (25 thousand tomans per kg), therefore the cost of steel It is about 1,750,000 Tomans in housing construction. Therefore, assuming the removal of the profit of all links of the steel chain in order to reduce the cost of housing construction, this price will eventually decrease by 20%, equivalent to 350 thousand Tomans per square meter, which is very insignificant.

The successful experience of joint cooperation between the Ministry of Housing, the Ministry of Somat and steelmakers in supplying iron needed for the Mehr housing project and the initiative taken at that time, which resulted in a reduction in the price of rebar in the market was done, it can still be used in a new way to supply the steel needed by the national housing movement.

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