Economy, Business And Markets

Shoring Up Steel Sector

Shoring Up Steel SectorShoring Up Steel Sector

A s the global steel market is projecting slower growth amid lower demand for the metal, the manager of a private Iranian steel company believes the manufactures should diversify their products to overcome the current recession in the steel sector and boost profitability.

Bahman Qasemi, the managing director of Arian Steel Company says a “diverse range of products and low production costs” have enabled his company to have a competitive edge in the domestic market. He also referred to the challenges faced by Iranian steelmakers.

Speaking with the Persian economic daily Donya-e-Eghtesad, Qasemi pointed out that Iran’s steel sector is currently struggling with “shortage of funds which has pushed companies to operate at production rates far below capacity.”

He explained that while the steel mills should generally have buffer storage for raw materials three months ahead of production, some companies in Iran can buy their needs only ten days in advance due to inadequate funds.

 Realistic Target

Authorities are seeking to gradually increase steel production rate to more than 50 million metric tons by 2025 in line with the 20-year Vision Plan. But Qasemi believes the ambitious target is “unlikely to succeed as the current production of rolled steel in the country stands at only about 16 million metric tons per year.”

According to Qasemi, if Iran is to reach the average per-capita steel consumption of 250 kilogram in the developing economies, it should increase steel production rate to at least 20 million metric tons; a target which he says is more realistic than the target set by the Vision Plan.

Iran launched seven provincial steel projects in 2006, each with a production capacity of nearly 800,000 metric tons per annum. According to Qasemi, implementation of these provincial projects helped eliminate the need for import of steel ingot during the past three years.

He also referred to the recent proposition by the minister of industry, mine and trade, Mohammad Reza Nematzadeh to merge small and large steel companies, saying the private steel companies “have not yet reached the level of maturity which is necessary for cooperation.”

Iranian steel companies are struggling to keep production costs down amid inflation and increasing energy costs.  Meanwhile, with lower global demand for the metal creating additional burden for producers and exporters, companies such as Arian Steel find it increasingly difficult to compete in the unstable international market.