Economy, Business And Markets

China Pledges to Help Resolve Financing Issues

China Pledges to Help  Resolve Financing IssuesChina Pledges to Help  Resolve Financing Issues

The Chinese ambassador in Iran, Peng Sen, vowed that his country would soon solve the financing problems with the People's Bank of China, Sinosure, and China Development Bank to help facilitate execution of Iran's provincial steel projects, Eghtesadnews reported.

He made the remarks during his meeting with deputy minister of industry, mine, and trade and the head of Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), Mehdi Karbasian, adding that his country is willing to facilitate the funding process to boost cooperation with Iran in the mining industry, particularly the steel sector.

The seven major steel projects in Iran that are awaiting 1.8 billion euro in investment by China have been delayed for months due to issues related with financing, IMIDRO had announced earlier. The projects are being developed by IMIDRO, as the country's state-owned mines and metal holding company, in a bid to increase the country's crude steel output by at least 8 million metric tons per year. Iran's 2025 Vision Plan requires the steel sector to produce 55 million tons of crude steel annually by the next decade.

"Over the past months, we have met our obligations towards the state-owned Chinese contractor, China Metallurgical Group Corporation (MCC), but the process to open the Letters of Credit (LC's) has not been actively pursued by the Chinese side, despite their earlier promises," Karbasian said.

Kabasian further noted that the Chinese banks' bureaucratic procedures have hindered the progress of some provincial steel projects for which LC's have already been opened, adding that an Iranian delegation will soon visit China to follow up the issue.

"Over the past year, many European companies have expressed their willingness to invest in Iran's mines and mineral industries," said the IMIDRO head, noting that the Chinese companies have been lagging behind.

The development of steel industries in Iran is a trend that began during the previous administration, led by former president Mahmoud Ahmadinejad, and continued by President Hassan Rouhani's administration. This is while many of the steel projects approved and even executed during Ahmadinejad's terms in office (2005-2013) were planned at wrong geographical locations with severe water shortage.

Secretary of Iran Steel Producers Association (ISPA), Rasoul Khalifeh-Soltan believes new investments in the steel sector should be based on research and preliminary studies, saying: "The sector could generate more profit if steel projects were developed near the mines (to produce iron ore pellets) or by the sea."

The domestic steel market has suffered from a sharp slowdown in the past two years. Recession in the market and the unprecedented global decline in iron ore prices are viewed by analysts as the main reasons behind stability in the domestic steel prices, Fooladnews reported.

The sector is now hoping that allocation of funds by the government towards development of infrastructure and stimulates the construction sector to take it out of recession in the coming year. According to market expert, Ali-Asghar Bahrami, promoting small-scale supply units in the stock market is another measure that can boost the level of trade in the steel market by allowing small dealers to enter the market.