Company Exports First Cargo of Steel to Iraq

South Rouhina Steel Complex exported 500 tons of reinforcement bars to Iraq on Tuesday via Iran Mercantile Exchange’s export trading floor, says Iran’s commercial attaché to Iraq, Naser Behzad.

The shipment was valued at $250,000 paid in cash, according to IME data, IRNA reported.

IME is a commodities exchange based in Tehran. Founded in 2006, IME trades in agricultural, industrial and petrochemical products in the spot and futures markets.

Iran’s steel exports to Iraq have been meager in recent years as local steelmakers largely failed to capitalize on the neighboring country’s booming construction market.

According to Nasse Kan’ani, head of the Foreign Ministry’s Special Iraq Committee, the neighboring Arab nation suffered $100-150 billion in economic loss as a result of war against terrorist groups in recent years. As it emerges from  war and civil strife, he says, Iraq is seen as a unique market, especially given that the country does not produce much.

There is also the fact that Iranian steelmakers are bracing themselves for a year of overcapacity as the government’s newly proposed budget bill is set to slash the development budget, negatively affecting steel usage in the next fiscal (March 2018-19).

Iranian construction material producers, such as the steel and cement industry and their downstream plants, have traditionally been dependant on government financing of infrastructure projects for demand stimulation. This is while the local  construction market is stagnant for years with demand for related materials such as rebar at all-time lows.

Exporting to a country emerging from war and destruction and in need of massive reconstruction should help Iran producers handle overcapacity with less pain.

Rouhina Steel’s first production phase was launched in March with the capacity to produce 500,000 tons of rebars per year. The capacity is to rise to about 3 million tons in two years. The plant was set up with a $39.47 million investment by the private sector using domestic and international financing.

According to the company’s CEO Mohammad Jaberian, Rouhina Steel’s second phase will come on stream by the yearend in March 2018.

The new budget bill proposes about 600 trillion rials ($14.28 billion) for development projects next year – down 110 trillion-rial ($2.6 billion) compared to last year.

Iran has set a target to expand steel output capacity to 55 million tons by the end of 2025, and to export 20-25 million tons of the output. As such, expanding its export base will be the industry’s primary concern as local demand is unlikely to pick up anytime soon.