The Iron and Steel Council of Iran has lashed out at the decision to double gas prices for steel mills in a letter to the new Industries, Mining and Trade Minister Abbas Aliabadi.
According to the letter, which has also been signed by the heads of the Iron Ore Association of Iran and the Iranian Steel Producers Association, the measure will harm Iran’s steel production, as producers will lose the advantage of cheap gas.
The two officials noted that with the implementation of the new measure, gas prices fed to steel mills will increase 30-fold and the competitive advantage of steel production will be completely lost, which will cause many small producers to incur losses and face closure.
Unlike major steel mills in the world using coal in production, Iranian steelmakers have taken advantage of cheap gas because of the country’s vast gas reserves. However, the gas industry in Iran is currently facing challenges in meeting demand.
Iran ranks second in the world after Russia, with about 34 trillion cubic meters of gas reserves.
According to the BP Statistical Review of World Energy, Iran has 34 trillion cubic meters of natural gas reserves, or 18% of the world’s proven reserves.
Vast reserves and cheap prices come with high consumption.
According to the German Federal Institute for Geosciences and Natural Resources, Iran ranked fourth on the list of countries with the highest gas consumption worldwide in 2020, trailing only the US, Russia and China.
Then there is the issue of underinvestment in Iran’s gas industry.
Oil Minister Javad Owji has said Iran needs to invest $80 billion in its gas industry to achieve its 1.4 bcm/d production target.
"If there is insufficient investment, we will have to import," he was quoted as saying by the Oil Ministry’s news service Shana.
Sanctions have played a significant part in preventing foreign investment in Iran’s gas industry.
According to Steelradar.com, gas and electricity are widely considered primary energy sources in the steel industry. However, their limitations often result in challenges and complications during steel production. It will also affect the prices and export figures of steel products.
It was reported that electricity consumption in the first three months of the steel industry this year increased by 7.5% compared to the previous year, which indicate a rise in production.
The Energy Ministry has agreed to waive penalties or restrictions for industrial electricity consumers who observe their contracted electricity volume. As a result, these consumers will have to consume electricity without limitations for eight hours at night.
Steel products that were significantly impacted by gas restriction included sponge iron, recovery and production units of furnaces, and billet production.
A substantial portion of gas consumption in the steel industry, accounting for over 75%, is dedicated to sponge iron production. On the other hand, billet production relies heavily on electricity, with a consumption rate exceeding 70%. This indicates that a significant portion of the energy input for billet production is derived from electricity. The high reliance on gas and electricity in these respective processes underscores the critical role of these energy sources.
According to World Steel Association, Iranian steel mills produced a total of 30.6 million tons of crude steel in 2022, registering an 8% rise compared with 2021.
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 with 1.01 billion tons, down 2.1%. It was followed by India with 124.7 million tons (up 5.5%), Japan with 89.2 million tons (down 7.4%), the United States with 80.7 million tons (down 5.9%), Russia with 71.5 million tons (down 7.2%), South Korea with 65.9 million tons (down 6.5%), Germany with 36.8 million tons (down 8.4%) and Turkey with 35.1 million tons (down 12.9%).
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.
Mobarakeh Steel Company is the biggest steelmaker in Iran and the Middle East and North Africa region, accounting for about half of the country's steel production.
The state-owned company is located 65 km southwest of Isfahan, near the city of Mobarakeh in Isfahan Province. It is one of the largest industrial complexes operating in Iran.
MSC was commissioned after the victory of Iran’s Islamic Revolution in 1979 and initiated operations during 1993. It underwent major revamping during the 2000s.
MSC's products consist of hot- and cold-rolled sheets and coils, narrow strip coil, tinplate sheet, galvanized coil, pre-painted coil and slab produced according to national and international standards.
These products meet the needs of various industries, such as automotive, home appliances, pipe manufacturing, pressure vessels, food, chemical and medical packing, construction, transportation, naval devices and metal equipment.
