Iran is capable of producing 25 million tonnes of steel in the current fiscal year which ends on March 21, 2019 but foreign sanctions and duties are a big hurdle, the head of the Iranian Steel Producers Association says.
Iranian steel production rose to record 20.6 million tonnes in the first 10 months of 2018, making the country the world’s 11th biggest producer, data by the World Steel Association showed last month.
This figure can rise to 25 million tonnes by the end of the current Persian year provided that the government puts its weight behind the push, Bahram Sobhani said on Monday.
About 9-10 million tonnes of this amount can be exported if everything goes as planned and the government facilitates conditions for exports, he added.
In the past, the government has left no stone unturned in bolstering the sector, withdrawing the special rate foreign exchange allocation for steel imports in a bid to support local production.
“Sanctions and other external constraints have made exports of steel products difficult. In this situation, it is expected that the central bank, customs and other bodies will put hands together to export steel. Otherwise, the surplus output should be stocked or production slashed,” Sobhani said.
Iran’s steel exports are already facing an increasingly hostile terrain in Europe where the bloc’s executive body, the European Commission, has levied trade tariffs against Iranian products.
Last October, the European Union decided to hit hot-rolled steel from Iran with trade tariffs despite initial opposition to punitive measures by European governments.
US sanctions introduced in August represent a double-whammy. In October, the US Treasury announced sanctions on Mobarakeh Steel Company, the largest steel maker in the Middle East and North Africa and one of the largest industrial complexes operating in Iran.
However, the degree of the Iranian steel sector’s vulnerability to outside sanctions is markedly reduced.
When slapped with US and European sanctions in 2011, Iran was the world’s second or third biggest steel importer with 11 million tonnes a year, which gnawed at its oil revenues at a cost of $7-8 billion.
“Today, we have reached a point where we are thinking of exporting steel and the situation is reversed,” Bahador Ahramian, the head of the Iranian Steel Producers’ Association, said on Monday.
Iran exported an average of 1.35 million tonnes of steel in 2011 and 2012. That capacity has risen to about 8 million tonnes now, indicating how the sector has grown by leaps and bounds.
More than 5.3 million tonnes of Iranian rebars, billets, IPE (I-beams), blooms and slabs were exported in the first eight months of the Persian year, which are expected to reach 7.8 million tonnes by the end of the year, Sobhani said.
“At an average rate of $450 (per tonne), Iran’s steel exports will total $3.5 billion,” IRNA quoted him as saying.
The additional revenue is important as it insulates the steel sector from sanctions by making it self-sufficient.
Moreover, more than 50 industries in Iran are linked to the construction industry. If there is not enough steel, the sector will grind to a standstill with all the related industries.
Iran’s developing economy heavily relies on construction. The country plans to boost steel output to 55 million tonnes a year by 2025, of which 10 million tonnes would be earmarked for export.
US sanctions make this ambitious target vulnerable, chiefly because they make Iran’s courting of foreign investors difficult while steel mill equipment makers keep aloof from the country.
“Our main customers, including Iraq and Afghanistan, are abusing the sanctions restrictions, and in the past weeks they have imposed heavy duties on Iranian steel products, which can make exports more difficult,” Ahramian said.
Still, the self-sufficiency drive is on track and industry experts concede that even in worst-case scenarios, Iran’s steel industry will continue to grow.
“Previously a steel importer, the Islamic Republic of Iran has now reached the place where it can manufacture all kinds of steel equipment and localize related technologies,” Ahramian said.
“The zero to 100 of a steel mill can now be designed and built in Iran,” he added.
In January, Iran brought online its third steel plant which uses domestic technology for production of direct reduced iron (DRI) or sponge iron.
In June, it launched commercial production of HR coils, steel sheet and ribbed sheet at Mobarakeh Steel Company, with a capacity of 1.6 million tonnes.