Iranian steelmakers have suffered gas supply restrictions in winter in recent years, leading to a decline in output and at times the closure of many small- and medium-scale production lines.
Collating the lost output with the global prices of last year, Vahid Yaqoubi, the deputy head of Iran Steel Association, said the steel industry suffered $5-6 billion in losses due to the gas outage, Mehr News Agency reported.
In the winter (fourth quarter) of last Iranian year (Dec. 22, 2021-March 20), Iran faced a huge imbalance in gas production and consumption, and according to Oil Minister Javad Owji, there was a deficit of 200-250 million cubic meters of natural gas during the period. Although this imbalance did not cause outage for domestic consumers, it had remarkable consequences for large industries such as steel and petrochemicals.
“In last year’s Q4, production did not decline in some plants because steelmakers such as Mobarakeh Steel Company are strategic, but on the other hand, new steelmakers and DRI production plants that started operations in the past few years were hard hit,” Yaqoubi said.
"That's why we saw fewer outages in our steel units, but it should be noted that natural gas has no alternative in the steel industry. For example, in the production of power plants, natural gas can be replaced by liquefied gas, but in the process of producing steel from DRI, there is no other alternative, and gas is extremely vital for this industry.”
According to the official, total production declined by 2.2 million tons in the fiscal 2021-22 compared to the year before, which also faced power and gas outage.
“In fact, in the fiscal 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.”
“In general, a fall in supply leads to a price hike. For example, due to the shortage of supply in the summer of last fiscal year [June 22-Sept. 22], we saw a big jump in prices, because in this period, as per the decision of the National Security Council, steel mills could only use 10% of their production capacity, but after we requested a revision, only 20% of the production capacity were reinstated. This decrease in supply caused a sharp increase in prices in the second quarter of last year.”
Better Management This Summer, Impact on Capital Market
Although the situation has improved this year, with the coordination of the Ministry of Energy; Ministry of Industries, Mining and Trade; and Iran’s Steel Producers Association, restrictions were not imposed on only cement and steel industries (as in last summer) and were spread among other industries as well, Yaqoubi said.
Lauding the management of Energy Ministry this year, he added that this summer there will not be a decline of more than 30% in production.
On the impact of gas outages during the winter of last year on production and supply, he said, “In last year’s Q4, because the plants expected gas restrictions, they planned to carry out their repairs at that time, causing the supply of DRI to remain stable, although the issue led to a 20% rise in prices.”
Yaqoubi noted that the steel industry owns 12% of Iran’s capital market, adding that the 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 their production has a direct effect on the profitability and value of public shares,” he said, adding that some steel industries in northern Iran had 53 days of gas outage last year, which caused their stocks to fall compared to other stocks.
“Such problems increase the risk of operating in this market."
According to the oil minister, $80 billion of investments are needed for the development of gas industry, which is a considerable amount even in the event of the Joint Comprehensive Plan of Action’s revival.
“Although there are solutions for this issue with the government defining incentives such as tax breaks, the steel industries themselves can procure the gas they need by collecting flare gases,” he said.
Production Dips as Exports Surge: ISPA
According to the Iranian Steel Producers Association, the output of semi-finished products stood at 27.9 million tons in the fiscal 2021-22 (ended March 20), 8% less compared with the corresponding period of last year.
Billet and bloom made up 16.66 million tons of total semi-finished production, down 11% year-on-year.
Slab output reached 11.24 million tons to register a 2% YOY decline.
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% decline compared with the similar period of last year.
Rebar production stood at 9.15 million tons (down 4% YOY) and was followed by beams with 1.22 million tons (down 2% YOY) and L-beam, T-beam and other types with 837,000 tons (up 1% YOY).
The production of flat steel with 8.49 million tons registered an 8% YOY 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% compared with last year’s corresponding period.
The output of direct-reduced iron stood at 30.33 million tons during the period under review, down 3%.
A total of 51.54 million tons of iron ore concentrate were produced in Iran by major steelmakers in the fiscal 2021-22, registering a 4% increase compared with the same period of last year.
The pellet output of major steel mills reached 50.92 million tons during the year under review, posting a growth rate of 10% compared with the previous year.
A total of 7.68 million tons of semi-finished steel products were exported from Iran in the fiscal 2021-22, up 25% compared with the previous year.
Billet and bloom had the lion’s share of semis exports with an aggregate of 5.1 million tons, up 12% compared with the previous year’s corresponding period.
Slab exports amounted to 2.58 million tons during the period, up 62% year-on-year.
Exports of finished steel products grew by 20% to 3.4 million tons during the period.
Rebar accounted for the largest portion of finished steel products exported from Iran during the period, with 2.5 million tons. The total volume of Iran’s rebar exports experienced a 36% growth compared with the same period of last year.
Beam exports amounted to 145,000 tons during the period under review, down 15%.
About 200,000 tons of L-beam, T-beam and other types were also exported from Iran during the period, up 6%.
Hot-rolled coil exports amounted to 433,000 tons, registering a 20% decline compared with the year before.
Cold-rolled coil with 17,000 tons registered a 35% decline YOY and coated coil with 115,000 tons, up 46% YOY, was the other finished steel product exported from Iran.
Exports of direct-reduced iron increased by 25% to 1.06 million tons, ISPA figures show.
Imports of finished steel decreased by 13% to 778,000 tons during the same period, which mostly included HRC with 140,000 tons, down 59% compared with the year before; CRC with 264,000 tons, down 1%; coated coil with 224,000, up 7%; L-beam, T-beam and other types with 38,000 tons, down 12% YOY; rebar with 32,000 tons, up 19% YOY and beam with 17,000 tons, up 70%.
Semi-finished steel imports made up 6,000 tons of the total import volume, up 20%.
Iran imported 2,000 tons of billet and bloom in the period, down 50% YOY. Slab imports stood at 4,000 tons, up 300% from last year's same period.
Iran did not import DRI during the period under review.
