Economy, Business And Markets

China Starts Financing Steel Project in SW

China Starts Financing Steel Project in SW China Starts Financing Steel Project in SW

China has deposited the first tranche of the pledged 1,8 billion euro investment for the seven national steel projects known as Provincial Steel Projects after a months-long delay, Fooladnews quoted deputy minister of industry, mine, and trade Mehdi Karbasian as saying on Saturday.

The money is for Sepiddasht Steel Plant in the southwestern province of Chaharmahal and Bakhtiari, Karbasian, who is also the head of the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), explained adding that funding for the remaining six projects is being finalized and will soon be paid.    

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 stipulates that the steel sector should annually produce at least 55 million tons of crude steel in ten year time.

According to IMIDRO officials, apart from financing, a top priority for the seven steel projects is to put into operation the sponge iron production lines in each of the seven steel plants.

"By the end of the current Iranian calendar year (March 20, 2016), at least two out of the seven projects will be able to produce sponge iron as the prerequisite for the production of steel", Karbasian noted.

Since Iran and the major powers (the permanent members of the UN Security Council plus Germany) clinched an interim nuclear deal late November 2013, foreign companies in sectors such as automobile, oil and gas, and steel have increasingly sought to enter the Iranian market. Their efforts were redoubled after a nuclear understanding was reached in the Swiss city of Lausanne on April 2 based on which the draft for the final nuclear agreement will be written.

"Especially after the Lausanne deal, a number of foreign companies have presented proposals to invest in our steel sector," said member of the Iranian Steel Producers Association (ISPA), Reza Shahrestani.

The ISPA member, however, added that the foreign investors are yet to build their confidence in the domestic market, pointing out that failure to meet long-term goals could dissuade foreign financiers from entering Iran's business environment. According to Shahrestani, administrations in the past embarked on various major projects in the steel sector without proper planning and foresight. He stressed that only long-term and stable plans will encourage foreign financiers to step in.

The official added that both financing and cutting-edge technology are currently required in the steel sector; "however the overall economic growth is a basis for development in every sector." Over the past few years, according to Shahrestani, the development projects in the country hit a slump due to budget deficits and the sharp decline in global oil prices. Consequently, the steel consumption reduced remarkably. The situation deteriorated when there was an unprecedented downturn in the housing and construction sector.

According to the chairman of iron traders union, Mohammad Azad, the recession in the steel market over the past 14 months has caused a 35% decline in prices. Azad predicted that as long as the development projects and the construction sector are in recession, no change can be anticipated in the steel market. He warned that many steel plants in the country are working at 50-60% capacity.