Activation of the trigger mechanism; new challenges for the Iranian hardware market
As one of the most important economic sectors of the country, the Iranian hardware market has always shown special sensitivity to domestic and foreign political and economic developments. In recent years, whenever sanctions or major political changes have occurred at the global level, the steel industry and the iron market have been quickly affected and have been subject to price fluctuations and changes in trading volumes. The activation of the trigger mechanism and the return of UN sanctions against Iran have once again highlighted this sensitivity and created a situation in which not only domestic traders and producers, but also foreign customers look to the future with doubts and concerns. Although the full details of the implementation of these sanctions and the scope of their impact are still unclear, the experience of past years shows that even the announcement of the return of sanctions alone can create a heavy psychological atmosphere in the market and change the price path of many goods, including steel products.
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The Snapback mechanism is one of the key clauses of the JCPOA nuclear agreement, which allows the member states of the agreement to automatically reimpose UN sanctions without the need for a re-vote if Iran violates its commitments. The importance of this mechanism is that it has a higher implementation speed compared to other sanctions mechanisms and can affect the political and economic atmosphere of a country in the shortest possible time. For the hardware market, this issue is doubly important; because Iran’s steel industry is not only dependent on imports of some raw materials and industrial equipment, but also plays a large role in the country’s economy in the export sector. Therefore, even if the sanctions do not directly target steel exports, the return of insurance, shipping, and banking sanctions could significantly increase the costs of this industry and create risky conditions for manufacturers and exporters.
Diplomacy and the latest efforts to reduce pressure
In the days leading up to the activation of the trigger mechanism, Iranian diplomacy reached its peak, and extensive efforts were made to prevent the implementation of this mechanism. Abbas Araghchi, the senior Iranian diplomat, met with European officials and members of the JCPOA troika on the sidelines of the UN General Assembly session, perhaps to persuade countries to postpone the implementation of the sanctions. At the same time, intensive negotiations were also underway with the Director General of the International Atomic Energy Agency and world powers to reduce the intensity of tensions. But the result of the Security Council vote was something else; the proposal of China and Russia for a six-month postponement was not accepted, and finally the last shot of the JCPOA was fired. The consequence of this for the Iranian hardware market is quite clear: the tense political atmosphere will create new risks in the fields of trade, insurance of goods, and international transportation. Even if steel is not directly included in the sanctions list, the increased costs and more difficult money transfer processes could severely impact the industry.
The effect of currency fluctuations on iron and steel prices
The foreign exchange market is always the first to react to political developments, and this time was no exception. A review of the trading trend shows that the dollar rate has risen from 102,000 tomans in the last days of Shahrivar to more than 107,000 tomans in early October, and the euro has also recorded a record of 125,000 tomans in the same period. This increase not only reflects the growth of inflationary expectations in the country’s economy, but also directly affects the hardware market. This is because the prices of steel, rebar, beams, and steel sheets are heavily affected by the exchange rate. An increase in the dollar rate means an increase in the cost of importing raw materials and industrial equipment, which causes manufacturers to increase the prices of their products to compensate for the costs. On the other hand, severe currency fluctuations make many buyers and market participants hesitant to make large transactions and prefer to wait for relative stability. This can lead to a decrease in transaction volume and, on the other hand, to an increase in the value of warehouse inventory.
Experience with past sanctions and ways to circumvent them
Economic experts believe that the return of sanctions does not necessarily mean a complete halt to Iran’s trade. The experience of 2010-2015 showed that Iran was able to continue exporting its oil, petrochemicals, and steel products even at the height of the sanctions. During that period, China and India remained the most important buyers of Iranian oil and steel, and alternative routes were designed to transfer goods and foreign exchange. Although these routes imposed higher transportation and insurance costs on the country and products were offered at greater price discounts, the export cycle did not stop in the end. This experience shows that even in the current situation, Iran can still maintain a part of the Asian markets by using complex trade networks. For the steel industry, this is very vital; because exports play an important role in providing the country with foreign exchange and their cessation could have serious consequences for the domestic market. However, it should not be overlooked that the financial pressure resulting from increased trade risk will place a heavy burden on producers.
The future outlook for the hardware market: between fear and hope
Iran’s hardware market is now in a sensitive position. On the one hand, the growth of the exchange rate and the possibility of increasing insurance and transportation costs could push up the prices of rebar, beams and other steel products in the short term. The increase in these costs will be directly transferred to consumers and will face new challenges for construction and development projects. On the other hand, if steel exports to markets such as China, India and regional countries continue, the inflow of foreign currency from this trade could reduce some of the pressures and contribute to the relative stability of the market. Cooperation between Russia and China in dealing with the economic effects of sanctions is also considered a moderating factor. However, analysts emphasize that what threatens the market most is not direct sanctions but the psychological atmosphere resulting from them. Continued severe currency fluctuations, stricter insurance processes and changing behavior of foreign buyers could upset the fragile balance of the market. Therefore, any new political news or any new international decision can change the course of prices in the shortest possible time.
Conclusion
The activation of the trigger mechanism and the return of international sanctions is a difficult test for the steel industry and the hardware market in Iran. This event has not only caused the exchange rate to fluctuate, but has also posed serious challenges to insurance, transportation, and trade exchanges. Although the experience of past sanctions shows that it is still possible to continue exporting to some Asian markets, the financial and psychological pressure resulting from these conditions will remain on the shoulders of manufacturers. In such an environment, careful monitoring of the exchange rate, insurance decisions, and trade policies of countries such as China and India can be the key to better understanding the future of the market. The Ahan666 site will try to accompany hardware market activists on the path to better and more accurate decision-making with up-to-date and comprehensive analyses.
