EghtesadOnline: Increased lead exports in the first month of the current fiscal year (started March 21) over fluctuations in foreign currency market were a boon to producers but caused a shortage for local downstream industries such as battery producers, the head of Iran Society of Battery and Storage said.
“In recent weeks, the lead inventories of battery producers have all but depleted and they are now facing a serious lack of raw materials,” Kazem Mortaz was also quoted as saying by IRNA.
Each car battery needs an average of 12 kilograms of lead, which amounts to 144,000 tons per year, considering the country’s 12 million annual battery demand.
According to the Islamic Republic of Iran Customs Administration data, Iran exported 729 tons of lead during March 21-April 11, which indicates a significant growth, as producers exported 1,044 tons during the last fiscal year (March 2017-18), Financial Tribune reported.
The 22-day period was the height of Iran’s currency crisis and prior to a government intervention in the market, which saw the rial drop to unprecedented lows against the US dollar. For lead producers, this was the best time to look overseas.
The rial lost 19.7% of its value against USD during the period to drop to 58,650. And this is while it had lost upwards of 30% against the greenback the year before.
However, this changed on April 11, as the Central Bank of Iran abruptly announced the unification of USD rates and fixed it at 42,000 rials, while branding all unregulated trading in the free market as smuggling.
The CBI measure in effect ended the dual exchange rate for the US dollar and saw the official rate rise above 40,000 rials after 28 months.
According to Mortaz, the forex situation caused a $100-120 hike in lead prices, making exports preferable to supplying the domestic market.
“And this is while rich lead reserves and cheap energy in Iran have always helped Iran price its lead $30-40 less than the global prices,” he added.
The official called on the government to slap tariffs on the export of unprocessed lead, emphasizing that it deprives the industry of much-needed added-value.
“With proper governmental support, we can easily compete with neighboring countries in battery exports to East Asia,” he said.
Mortaz noted that Turkish battery producers currently enjoy not only cheap financing with 0.5-1% interest, but also have an 18% income and value-added tax and can import raw materials with no tariffs.
Lead Exports Slow Down Over Fixed USD Rates
Yet lead exports from Iran have slowed down since the new official USD rates were fixed, market sources told Metal Bulletin.
The wild volatility in currency movements and uncertainty over future rates caused lead exporters to restrict sales, market participants who source units from Iran told Metal Bulletin.
“Sixty percent of Iranian exporters are now taking a wait-and-see attitude because of the currency. 40% are still exporting but not at the usual pace or volume,” a lead trader who sources from the country said.
But producers in the country are generally meeting long-term contract commitments.
“They are delivering; they don’t want to default in case it hits their reputation as suppliers in the future,” a buyer of Iranian lead said on Tuesday
Iran is a major exporter of lead to India and Southeast Asia, although brands from the country traditionally achieve one of the lowest premiums in the market.
Spot demand remained unspectacular against good availability of units, several sources in the region said. But traders who usually sell Iranian lead into the Asian markets could look to cover from elsewhere.
“If the situation doesn’t change, we could see a big jump in premiums for non-Iranian lead,” a second lead trader told Metal Bulletin.