Economy, Business And Markets

Steel Production Chain to Be Balanced in 18 Months

Steel Production Chain to Be Balanced in 18 MonthsSteel Production Chain to Be Balanced in 18 Months

Inspecting industrial projects in the southern province of Fars, minister of industry, mine and trade, Mohammad Reza Nematzadeh anticipated that the domestic steel production chain will be balanced within 18 months, Fooladnews reported.

“Currently, some components of the steel production chain are working at full capacity while some are faced with shortage of raw material. Within the next 18 months, the production chain will be balanced and raw materials for different units will be supplied by the upstream production units”, Nematzadeh commented.

One processing unit currently struggling with shortage of raw material is the Pasargad Steel Complex in Fars Province. The complex, visited by the minister and lawmakers, was forced to shut down due to serious shortage of raw material.

Industrial experts believe that Iran could become one of the world’s leading steel manufacturers if the steel production chain, from iron ore exploration and extraction to the manufacturing phase is integrated and balanced. Such a crucial balance has not yet been achieved due to unequal benefits and incentives offered in different sectors. While some steel subsectors enjoy a profit margin of about 60 to 70 percent, other subsectors incur losses. According to mining experts, profit margins in the mining sector is twice the profit in the steel manufacturing sector.

The huge difference in the facilities provided to the private and government sectors is another factor causing further imbalance in the production chain, as the government sector still owns the lion’s share of the steel industry despite implementing vast privatization programs in line with Article 44 of the Constitution.

The industry ministry now aims at restoring a proper balance to the sector mainly through its mining and industrial arm, the IMIDRO. The Iranian Mines and Mining Industries Development and Renovation Organization, as the country’s major state-owned holding responsible for policies related with the national mining and mineral industries, has identified the shortcomings in various sectors and is trying to help the steel sector achieve its strategic goal of producing at least 55 million metric tons of crude steel by 2025.

The IMIDRO has so far taken practical steps to explore 200,000 square kilometers of the country in the eastern and northeastern regions. The project, according to IMIDRO, will be extended to the western regions during the current Iranian calendar year (started March 21). Increasing crude steel output requires a considerable amount of iron ore as the raw material, which will become available through discovery of new iron ore reserves. Officials at the ministry claim that the new exploration operations will help meet the country’s demand for iron ore concentrate and iron ore pellets, making import of the raw material unnecessary.

Meanwhile, some players in the steel industry believe the target to produce 55 million tons of steel within next ten years is overambitious, noting that the current annual steel output of about 18 million tons is below actual production capacity, which is at least 24 million tons. They cite the steel industry’s dilapidated infrastructure as the cause.

“Steel industry lacks the essential basic infrastructure. The desired growth in crude steel production demands excellent energy and transportation facilities,” said Rasoul Khalifeh-Soltan, secretary of the Iranian Steel Producers Association (ISPA), adding that double-tracking only 20% of the railway network would increase transportation capacity by at least 200% to 300%.

The ISPA secretary also mentioned that 20 million tons of steel should be exported annually by 2025 based on the Vision Plan. “To achieve this target, the country needs to develop the infrastructure at ports. The average annual growth in the steel sector is 7% while a corresponding capacity has not been developed in the ports for handling cargo,” Khalifeh-Soltan added.

Despite high hopes raised following the recent developments in nuclear negotiations between Iran and the major powers, expected to positively affect the steel sector if and when the sanctions [imposed against Iran by the West over its nuclear program] are lifted, success of the mining and steel industries depends to a great extent on prudent management and the sectors’ ability to survive the crises in the global iron ore and steel markets.