Shortage of gas has become a major headache for the steel industry, as curbs on gas supplies have intensified since last year so much so that direct-reduced iron production units have had to close down under severe restrictions, which has consequently affected the steel industry, according to Vahid Yaqoubi, an executive manager of the Iranian Steel Producers Association.
“Due to gas and electricity supply restrictions, we fell behind by about 6 million tons from our steel production plans last year [March 2021-22],” he was quoted as saying by the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture last week.
The sharp drop in temperatures across Iran in recent weeks has led to an unprecedented increase in energy consumption, which is also blamed on the cheap price of gas in the country. This is while Iran has lost gas import from Turkmenistan due to problems in the Central Asian country’s domestic network. As a result, gas supply to industries was curtailed to meet the growing needs of households.
“Despite the better management of electricity in the summer [June 22-Sept. 22, 2022] compared with the corresponding period of last year, gas restrictions started sooner this year. While our plan was for the restrictions to start from the beginning of the 10th month of the year [Dec. 22, 2022-Jan. 20], they started from the beginning of the ninth month [Nov. 22-Dec. 21, 2022]. At first, we saw a 30% cut in gas supply, then 50% and 70%, and currently the supply to northern steel manufacturing companies [mostly DRI plants] has been completely cut off and the plants closed down. Some arc furnaces and rolling mills have also closed since they do not have raw materials,” Yaqoubi said.
Vital Role of Gas in Iran’s Steel Industry
Noting that gas plays a pivotal role in the steel industry, the ISPA c said Irhiefan’s steel production is based on DRI.
“If there is no gas, no DRI will be produced, and in the absence of DRI, other parts of the steel manufacturing chain will be closed and steel products cannot be produced. Therefore, the role of gas in the steel industry is vital,” he added.
He explained that there is no replacement for gas in the Iranian steel industry.
“For example, gas can be replaced with mazut in other industries, while it is not possible in the steel industry. Therefore, with gas outage or restrictions, all processes in the steel industry will inevitably be disrupted,” he said.
According to Yaqoubi, the steel industry’s gas usage stands at about 550 cubic meters per ton, of which 70% are used by DRI plants alone.
“In the ninth month of the current year [Nov. 22-Dec. 21, 2022], out of 40 million cubic meters of needed gas, they only supplied 15 million cubic meters. During the last 7-10 days, the weather has become colder and they’ve reduced the allocated gas volume and even the 15 million cubic meters have not been supplied,” he said.
The ISPA chief noted that due to restrictions in supply of gas to power plants, industries have also had to grapple with electricity shortage.
“For instance, for more than 40 days, the gas supply of Khorasan Steel Company has been cut off and since last week, there are electricity restrictions imposed on this plant. Mobarakeh Steel Company, the biggest steel manufacturer in Iran, has been facing a 50-70% gas usage restriction since last week besides a 30% electricity usage restriction. We fear that as the weather gets colder, this restriction will also increase to 50% or more,” he added.
According to the official, a total of 800 million cubic meters of gas are used in Iran, of which 650-700 million cubic meters are used by households and commercial units, “therefore, practically no gas is left for industries.”
Yaqoubi concluded that there is a pressing need for investment in Iran’s gas industry to increase production, while household and commercial consumption needs to be optimized.
Heavy Losses in Lost Production
Earlier, the ISPA chief had said total production decreased by 2.2 million tons in the fiscal 2021-22 compared to the year before, which also saw power and gas outage.
“In 2021-22, the target was 34 million tons [in steel production], but we reached about 27.9 million tons, which means we had a loss of about 6 million tons vis-a-vis the target,” he added.
Drawing on global prices of last year, Yaqoubi said the steel industry suffered $5-6 billion in losses due to the gas outage.
“In general, a decrease in supply leads to an increase in prices. For example, due to the shortage of supply in the summer of last year, we saw a big jump in prices, because during this period, as per the resolution of the Supreme National Security Council, steel mills could only use 10% of their production capacity, and after we requested a revision in this resolution, only 20% of the production capacity were reinstated. This decrease in supply caused a sharp increase in prices in Q2 of last year,” he said.
“The steel industry owns 12% of Iran’s capital market, which share reaches around 20%, taking into account the upstream production chain. The companies’ shareholders buy the shares of steel companies by considering certain factors, and a decrease in production has a direct effect on the profitability and value of the public shares.”
Yaqoubi noted that some steel industries in northern Iran had 53 days of gas outage last year, which caused their stocks to fall, which problems increase the risk of operating in the steel market.
Q1-3 Production
New data released by the Iranian Steel Producers Association show Iranian steelmakers registered a 13% and 12% rise in the production of semi-finished and finished steel products respectively during the first nine months of the current Iranian year (March 21-Dec. 21, 2022).
According to the report, they produced a total of 23.78 million tons of semis during the period, 13% more than in the corresponding period of last year.
The production of billet and bloom reached 14.45 million tons, registering a 16% rise while that of slab stood at 9.33 million tons to mark an 8% rise.
The output of finished steel increased by 12% to 16.68 million tons during the period.
Long steel products grabbed the highest share of finished steel output with 9.73 million tons, registering a 15% increase year-on-year.
Production of rebar stood at 8.16 million tons (up 18%), beams hit 932,000 tons (down 2%) and L-beam, T-beam and other types of beams amounted to 638,000 tons (up 5%).
Flat steel production reached 6.85 million tons (up 9%) while hot-rolled coil output had the biggest share of flat steel production with 6.62 million tons, marking a 7% rise. It was followed by cold-rolled coil with 1.83 million tons (down 1.5%) and coated coil with 1.05 tons (down 4%).
The output of direct-reduced iron stood at 26.37 million tons during the period, up 11%.
Iran and India are the world’s biggest producers of DRI, also known as sponge iron.
The output of semi-finished products stood at 27.9 million tons in 2021-22 Iranian year, 8% less compared to the previous year.
Billet and bloom made up 16.66 million tons of total semi-finished production, down 11% year over year. Slab output reached 11.24 million tons to register 2% decline and the output of finished steel decreased by 5% during the same period to 19.64 million tons.
Long steel products had a 11.21-million-ton share in the output of finished steel products, posting a 3% fall.
Rebar production stood at 9.15 million tons (down 4%). It was followed by beams with 1.22 million tons (down 2%) and L-beam, T-beam and other types with 837,000 tons (up 1%).
The production of flat steel with 8.49 million tons registered an 8% decrease.
Hot-rolled coil comprised 8.29 million tons in this category, showing a 6% decline, followed by cold-rolled coil with 2.59 million tons, unchanged, and coated coil with 1.5 million tons, up 2%.
The output of direct-reduced iron stood at 30.33 million tons during the period under review, down 3%.
Decline in Exports
A total of 5.22 million tons of semi-finished steel products were exported from Iran during the same period to register a 1% year-on-year growth, latest data released by ISPA show.
Billet and bloom had the lion’s share of semis exports with an aggregate of 4.08 million tons, up 18% compared with the previous year’s corresponding period.
Slab exports amounted to 1.13 million tons during the period, down 34% year-on-year.
Meanwhile, exports of finished steel products decreased by 1% to 2.45 million tons during the same period.
Rebar accounted for the largest portion of finished steel products exported from Iran during the period, with 1.9 million tons. The total volume of Iran’s rebar exports experienced a 7% growth compared with the same period of last year.
Beam exports amounted to 105,000 tons during the period under review, down 5%.
About 132,000 tons of L-beam, T-beam and other types were also exported from Iran during the period, down 9%.
Hot-rolled coil exports amounted to 237,000 tons, registering a 33% decline.
Export of cold-rolled coil with 17,000 tons registered a 13% rise and coated coil with 64,000 tons, down 25%, was the other finished steel product exported from Iran.
Iran exported 630,000 tons of direct-reduced iron, down 28%.
World’s 10th Biggest Crude Steel Producer
Iranian steel mills produced a total of 27.9 million tons of crude steel during from the beginning of 2022 to the end of November, registering an 8.5% rise compared with the corresponding period of 2021, latest data released by the World Steel Association show.
Iran's November output hit 2.9 million tons, registering a 3.9% year-on-year rise.
In terms of world ranking, Iran maintained its global standing as the world’s 10th biggest crude steelmaker.
China was the world’s largest producer during the 11-month period with 935.1 million tons of steel output, down 1.4%. It was followed by India with 114.2 million tons (up 6%), Japan with 82.3 million tons (down 6.9%), the United States with 74.4 million tons (down 5.5%), Russia with 65.9 million tons (down 7%), South Korea with 60.6 million tons (down 6.1%), Germany with 34.2 million tons (down 7.9%) and Turkey with 32.5 million tons (down 12.3%).
Iran is placed after Brazil (ninth) with 31.5 million tons (down 5.9%).
The world’s 64 steelmakers produced 1.69 billion tons of steel during the 11 months under review, down 3.3.7%. Countries located in Asia and Oceania collectively produced 1.24 billion tons of the total.
The Middle East produced 40.2 million tons of crude steel during the period, posting an increase of 7.7% compared with the same period of last year.
Crude steel is defined as steel in its first solid (or usable) form: ingots and semi-finished products (billets, blooms and slabs). This is not to be confused with liquid steel, which is steel poured.
The World Steel Association is one of the largest and most dynamic industrial associations, with members in every major steel-producing country.
Worldsteel represents steel producers, national and regional steel industry associations and steel research institutes. Members represent around 85% of global steel production.
The 64 countries included in the Worldsteel report produce 85% of global steel. These steelmakers produced 1.91 billion tons of steel last year, up 3.6%.
In 2021, countries located in Asia and Oceania collectively produced 1.38 billion tons of the total while the Middle East produced 41.2 million tons of crude steel, posting an increase of 1.2% compared with the same period of the previous year.
Iranian steel mills produced a total of 28.5 million tons of crude steel in 2021, registering a 1.8% decline compared with 2020.
MSC is the biggest steelmaker in Iran and the Middle East and North Africa region, accounting for about half of the country's steel production.
