Currently, Iran’s steel production capacity stands at 34 million tons per year, according to Deputy Minister of Industries, Mining and Trade, Jafar Sargheini.
Iran aims to become the world’s sixth largest steel producer as per the 20-Year Vision Plan, which targets annual production capacity of 55 million tons and 20-25 million tons of exports per year by 2025.
"Annual exports stand at $1.6 billion per year, providing the country with precious value-added," the Iranian official told Mehr News Agency.
The latest report of World Steel Association shows Iranian steel mills produced a total of 20.6 million tons of crude steel during the first 10 months of 2018, up 19% compared with last year’s corresponding period. Iran’s October steel output grew 10.6% year-on-year to hit 2.07 million tons. The Middle Eastern nation has been ranked the world’s 11th biggest steel producer during the period under Worldsteel's review. The country is placed between Italy (10th) with 20.61 million tons and Taiwan (12th) with 19.24 million tons.
Iran’s crude steel output stood at 21.23 million tons in 2017, Worldsteel announced, up 21.4% YOY.
The country has been working to increase its iron ore processing capacity, including both DRI and hot-briquetted iron production to feed its steelmaking expansion target.
Latest data released by the Iranian Mines and Mining Industries Development and Renovation Organization show major Iranian steelmakers exported a total of 3.88 million tons of semi-finished and finished steel products during the first seven months of the current fiscal year (March 21-Oct. 22) to register a year-on-year contraction of 3%.
The mills shipped out 364,215 tons of steel during the seventh month of the year (Sept. 22-Oct. 22), which signified a downturn of 17% compared with the same month of the year before.
Esfahan Steel Company (ESCO) was the only major steel exporter to register year-on-year growth during the seventh month of the year, as it shipped 39,190 tons to register a year-on-year rise of 59%.
With a total of more than 1.34 million tons over the seven months and 143,000 tons in the seventh month, Khouzestan Steel Company was Iran's biggest exporter of steel. Nonetheless, the mill experienced annual declines both during the seventh month of the current year and during the first seven months of the year.
Impact of Sanctions on Exports, Output
The downturn in exports comes as the United States has lately imposed the 'toughest of sanctions ever" against the country, banning world countries to do trade with Iran.
UK-based analysts in Fastmarkets says the sanctions are expected to cut Iranian steel exports further, gradually leading to lower Iranian steel output.
Although the move is now largely directed at the country’s oil industry and banking system, it is still expected to aggravate the situation in the Iranian export steel market, which had already been struck by the previous set of sanctions imposed by US President Donald Trump’s administration in early August, they wrote on their website.
The new round of sanctions took effect in November.
Trump announced his decision to pull out of the nuclear deals Iran signed with world powers, including the United States, back in May.
“The Iranian market is almost closed now, and banking issues are not the biggest problem here,” a Middle East-based source told Fastmarkets.
Shipping problems are the major issue at the moment because almost no company wants its vessels to call at Iranian ports, the source added.
“Mills still offer and you can book, but it may happen that you will never ship the material,” he said.
Cutting Prices to Compensate Trading Risks
In such conditions, Iranian steel exporters had to cut prices significantly to attract customers and to compensate for the risks involved in trade with the country.
Fasmarkets’ weekly assessment for the Iran export slab price was $420-430 per ton FOB Iranian ports on November 7, down by $30 per ton from $450-460 per ton on October 10.
Fastmarkets’ weekly price assessment for Iran export billet was $430-435 per ton FOB Iranian ports on November 7, down $30 per ton from $460-465 per ton on October 10.
Lower prices helped Iranian exporters win some contracts. In particular, several cargoes of billet were reported sold to regional Arab states, North Africa and Southeast Asia at $430-435 per ton FOB over the past seven days. This is down by $5-10 per ton from the previous bookings price.
“I thought that no one would want to buy Iranian billet after the tightening of sanctions, but I started to receive inquiries for 30,000-50,000 tons,” one trader said, adding that this included $30 per ton freight and $5 per ton extra expenses for trader’s margin and bank charges.
The price of Iranian billet totaling $465-470 per ton CFR is still the most attractive option for customers in the United Arab Emirates.
“CIS billet at $460 per ton FOB Black Sea plus $45 per ton freight would be $505 per ton CFR in the UAE, while the recent rebar price heard in the UAE domestic market is $510-515 per ton ex-works,” the trader said.
With the re-rolling cost of at least $20 per ton, using CIS billet would mean working with losses so, despite sanctions, customers in Peersian Gulf region will find a way to buy Iranian material as they need to cut rebar production costs, the source added.
Nevertheless, the source believed that steel export volumes from Iran, of semi-finished products in particular, will keep falling this year.
