An interview with Vice President of Sales and Marketing of Esfahan Steel plant Mr. Yazdi Zadeh
In an interview with Vice President of Sales and Marketing of Esfahan Steel plant the following was discussed:
Challenges caused by imposed duties on steel exports from the state within the past ten days with the decisions that were made in the field of exports; brought about the market price of steel a re-exposed volatility. It seems like the decision may have been made to create a balance of the market in one hand, and on the other hand to control prices and remove shortage of goods within the country. The steel export ban announced last week, caused the market to meet a shock. After the Steel makers protested against the issue and reflected the problems and disadvantages of steel export ban, with the reassessment made, steel was entered into the adjustment entry. But steel makers’ demand was not met, yet. Because, most steel makers find imposed duties of 40% -50% as an export ban. Mr. Yazdi Zadeh, vice president of sales and marketing of Esfahan Steel Plant, in an interview answered our questions about the status of the export of steel companies.
The detailed discussion:
*** What share of the consumption market of the country is devoted to Esfahan Steel Plant?
According to the apparent consumption relation that is the Sum of production and imports and the exports reduced, apparent consumption of broad beam wing (I) equaled to 2/059 million tons, and of rebar to 5/236 million tons last year that Esfahan Steel Plant is currently taking 74% share of apparent consumption beam and of the rebar is about 20 percent.
*** How much has the company export been, and what are the goals set for export ?
The company’s exports in the first seven months of this year, has been about 120 thousand tons, equivalent to 8% of production. The company’s planned amount has been 330 thousand tons (12% yield) that it has aimed to provide some part of the amount of foreign exchange needed to import raw materials and spare part supply and avoid shortages in the domestic market. Of course the company’s ability on longitudinal sections of export is much more than the amount mentioned.
*** Regarding to the fact that Esfahan Steel Plant is considered as the largest steel producer in the country, what percentage of its production has been offered into the internal market?
If we reduce the number of export which has been 8 percent out of the 100, the remaining products which equal 1/4 million tons have all been offered to the internal market through the Commodity Exchange.
***How do you evaluate trading Esfahan Steel Plant products in the Commodity Exchange? What is the role of the Commodity Exchange in determining prices?
I believe the commodity exchange has been successful in trading steel three
pillars of transparency, competition and price discovery which have been of the establishment goals. But there have been small problems which could be solved if they are focused on. It is natural that the commodity exchange determines the prices based on both domestic & foreign markets facts and proportional to the demands based on interactions between these two. If the price offered by the supplier is irrational, the demand doesn’t respond to it and it’s not sold. Conversely, if prices are reasonable, the demand will be stretched to the competition. Finally, the costumer will buy his/her optimal number of purchase, neither less nor more. If you look at the 8 year old history of the commodity exchange, you’ll see that the determined prices have been fluctuating. Namely, it has also been decreasing and increasing. This means the very competition and price discovery.
***Regarding to 40% of tariffs imposed on the bars and beam export, is possible for Esfahan Steel Plant to enter the international markets?
Let me clarify something before proceeding to answer the question. You know that the country is not self-sufficient in steel production, yet. If God willing, as the steel units reach to the capacity level, we will attain this important issue in the future. But currently, about 9 to 10 million tons of steel products are imported into the country annually that includes bars and longitudinal sections as a part. If the prices are calculated lower than world prices, two things can happen: first, is the rent; that is what the commodity exchange started up for and Second, what would be the incentive to import sections and bars? So it is important issue that macro policy makers must have particular regard to. The steel production process in Esfahan Steel Plant is different from other steel producers in the country. This means that we are using the blast furnace process that for the energy required for producing cast iron we need to import coal. Until the coal producing unit 3 is established the company main need to coal is met with import. In other words, Esfahan Steel Plant doesn’t consume the domestic gas and electricity for its energy supply like other producers. So fortunately or unfortunately, Esfahan Steel Plant production in the region is done in a competitive environment.
***Regarding to heavy export duties imposed on Esfahan Steel Plant, how is the required currency provided for the company?
This is an important question, and we want the dear decision makers within the government to consider the fact that the exchange we need consists of two parts. First, the currency used to purchase raw materials and for developing projects that will protect or increase production of the company, but the second is the foreign exchange we need to buy spare parts for production lines and consumer goods production lines. The time element is vital to prepare and send this exchange to these necessities providers’ account, and we may be faced with the risk of reducing or stopping the production.
***How do you assess the taxes imposed on the export of steel products as a value-added product?
Steel is a product associated with value added, and that’s why this product is part of the export basket of developed countries such as; South Korea, Japan, Germany and many other countries of the world. Notice that countries such as; South Korea and Japan import raw materials needed from other countries and export part of their steel production. Another notable point is that there are good potentials in some internal productions that they are not possible to use in the country, and the standard office does not allow them to domestic market. These products are of good value added and they can not only increase the level of employment in the export basket of the country, but also have a desirable exchange technology. Of course the government’s concern about the lack of market is perceptible. And, obviously the government is forced to take such decisions to get out of the current situation, even for a brief period. For example the Chinese government aimed to prevent crude sale and providing domestic market imposed a 4% taxes on coke export that due to the existence of excess capacity in the production of coke, Chinese manufacturers are pushing the government to eliminate or reduce these taxes to be able to export some parts of the domestic supply surplus.
Unfortunately, some inconsiderate traders purchased steel products from the internal market and converted to dollars at the boundaries that naturally, this disrupts the natural balance of the internal market. I wish the taxes were imposed on these kinds of exports. However, producers understand the issues well. They only export for their foreign exchange needs, but not to increase profitability. Because, their exports create a synergy, lead to increase production of the country. Please explain the advantages and disadvantages of steel bullion and steel products export restrictions and steel products export restrictions.