Economy, Business And Markets

Deregulation Will Ensure Future of Steel Industry

Deregulation Will Ensure  Future of Steel IndustryDeregulation Will Ensure  Future of Steel Industry

The 5th Iranian Steel Market Conference (ISMC 2015) opened in Tehran on Tuesday. The conference is aimed at studying the opportunities and challenges in the steel production chain from iron ore exploration and extraction to yielding the final crude steel and steel products.

The conference, one of the most prominent steel industry conferences in Iran, was organized by the Persian economic daily Donya-e-Eqtesad with support from the ministry of industry, mine, and trade; the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO); and giant global steel industry players such as the Spanish company Sarralle.

The conference's opening address was delivered by Mohammad-Reza Nematzadeh, the minister of industry, mine, and trade, who thanked Donya-e-Eghtesad newspaper for holding the conference, which he said would "help emphasize the private sector's role, in line with President Hassan Rouhani's goals for the industrial sector."

The minister further emphasized the country's ability to meet the objectives of the 20-year National Vision Plan that requires the steel sector to reach annual production rate of 55 million metric tons of crude steel by year 2025.

“Meeting the objectives of the Vision Plan is easily achievable as we currently have reached the capacity to produce 30 million tons of iron ore concentrate and nearly 34 million tons of rolled steel a year. We can easily increase the iron ore concentrate and pellets production to 80 million tons and the direct-reduced iron (DRI) production to 58 million tons by 2025”, said the minister as part of his address to the ISMC 2015.

Soon after the Iraq-Iran war in 1988, Iranian officials started a national movement to rebuild the country, focusing mainly on industrial development. Since then, the country has experienced huge progress in the non-oil industrial sector, although the upward movement slowed down during the eight years of former president Mahmoud Ahmadinejad’s presidency. During the two four-year terms, the country’s positive economic growth gradually dwindled away, due mostly to unwise economic decisions and western sanctions against Iran.

 Water Crisis

Iran is located in a semi-arid geographical region and water crisis, in general, threatens the country. Steel plants need a large quantity of water for cooling purposes. Unfortunately, during the 2005-2008 period, the two administrations led by Ahmadinejad approved a multitude of steel projects, many of which had either funding problems or water shortages. A handful of such projects were located in regions with serious water shortages while the rest, which were suitably located, later faced problems due to climate change.

It is practically impossible to relocate these plants now, since their construction is either completed or has made at least 30% physical progress. So, what is the solution to provide them with water? There is simply no solution! But since water is used only to cool down the steel plants and their furnaces, there is an alternative to water which is available everywhere, and that is air, Mansutti Sandro, the project manager of the Italian PERT company told the Financial Tribune during the conference.

Sandro, whose company has implemented projects at Chadormalu in the central province of Yazd, one of the driest regions in the country surrounded by deserts, said modern equipment can take advantage of the large temperature difference between days and nights in desert areas to cool down the machineries in mines and steel plants.

 Undeniable Role

The steel industry in Iran goes back to 1938. Ever since, eight 5-year and two 7-year development plans have been implemented for the industry. But the sector still faces problems because governments have always been the main decision-makers and today, if we want to see real progress in the steel industry, we should help the private sector become the regulatory authority in the sector, according to Mostafa Mo’azenzadeh, aide to the vice-president.  

The National Iranian Steel Company, which once used to be the country’s leader in steel production, has been recently revived. However, Mehdi Karbasian, the deputy minister of industry, mine, and trade and the head of the IMIDRO, said the government is no longer willing to be in charge of making the major decisions in the steel sector, but will act as a supporter while giving authority to the associations active in iron ore and steel sectors.

Calling the steel industry a strategic industry with great potential to create millions of jobs, Karbasian stressed that even after the full removal of sanctions imposed on Iran over its nuclear energy program, there would not be many foreign companies willing to invest in the steel sector unless the country implements genuine deregulation plans. According to the deputy minister, deregulation in the industry and especially in the mining and steel sectors is a top priority to attract foreign investors.

Despite the current problems, the IMIDRO has managed to attract funds for steel projects including a 3-million-ton steel project in the southeastern port city of Chabahar, whose contractors will be introduced by the end of the current Iranian calendar year (March 20) and the construction of the factory will kick off by September this year, according to Karbasian.

A 2.5-million-ton steel plant in Arvand region in the southwestern province of Khuzestan and a 3-million-ton steel plant on the southern Qeshm Island have also been finalized, Karbasian said. He added that negotiations are underway with Kuwaiti and Indian investors for launching two steel projects near the southern port city of Bandar Abbas. Kaveh and Hormozgan steel companies have also started their development plans with the aim of doubling production.

According to Karbasian, currently the main advantage of the steel industry is the active participation of the private sector, as between 65% and 80% of the recent seven steel projects are owned by domestic private investors. Meanwhile, the top official believes the country’s ultimate target is to attract major global companies to Iran’s mining and steel sectors, which are said to have great potential in terms of iron ore reserves and abundant sources of energy.