Economy, Business And Markets

Steel Sector Woes

Steel Sector Woes
Steel Sector Woes

Head of General Inspectorate Organization of Iran, Naser Seraj, criticized the excessive imports of steel, urging the officials to lend support to the domestic steel manufacturing sector, Mehr news reported.

The official’s comments come as the domestic steel sector is faced with lack of liquidity for implementing development projects. The liquidity crisis has forced many steel factories to store only enough raw materials for ten days of their plants’ operation, while as per the international standards, steel factories should store the required raw materials three months in advance.

A member of the Iranian Steel Manufacturers Association, Bahman Qasemi believes the only way for the steel sector to overcome the recession is a boost in exports, which is currently affected by the “doom and gloom in global markets,” ISNA reported.

Hence, he adds, “the manufacturers must increase the variety of their products to overcome the crisis.”

Years of sanctions on Iran’s economy [by the West over its nuclear energy program] as well as the sharp decline in global oil prices have caused budget deficits, making the government unable to fund the steel projects.

Under the current circumstances, the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), as the country’s major state-owned holding company in charge of the mining sector, expects the private sector to finance the steel projects.

Despite IMIDRO’s relative success in attracting investments for the industrial and mining projects, private mining firms suffer from lack of liquidity considering the fact that banks are unable or unwilling to provide them with facilities. The industry ministry is now counting on the National Development Fund of Iran (NDFI) to provide the much needed loans to the private sector.

Such problems have hindered development in the steel sector while the country, based on the 2025 Vision Plan, is expected to increase its crude steel output to at least 55 million metric tons per year. Many experts consider the goal as far-fetched given the current annual shortage of at least 6 million tons of iron ore pellet and lack of suitable infrastructure to provide water and electricity to the steel plants.

Another cause for concern is the nearly 60% decline in iron ore prices over the past year, making export of the raw material uneconomical for many small and medium-scale mining companies.

Although last week the global market witnessed the sharpest increase in prices since 2012, seeing a 5.9% increase in the mineral’s price to stand at $57 per ton for iron ore of 62% purity, the little fluctuations are not enough to generate hope among producers as the global analysts predict that the prices will remain around $60 per ton for the next two years—that is if no major crises erupts in the market.