Economy, Business And Markets

Uncertainty Surrounds Provincial Steel Projects

Uncertainty Surrounds Provincial Steel Projects Uncertainty Surrounds Provincial Steel Projects

While only €14 million out of the €1.8-billion finance pledged by China has so far been injected into the major national steel plants, known as the Seven Provincial Steel Projects, many experts argue the inappropriate location of a number of these projects will result in failure, Eghtesad-News reported.

According to the Parliament Research Center a number of the steel plants are being constructed in regions with no feasibility and the return of investment for them would be zero.

The Provincial Steel Plants date back to 2006 when the government decided to implement eight steel projects in different provinces in the provinces of Chaharmahal and Bakhtiari, Fars, Khuzestan, Yazd, Kerman, East Azarbaijan, South Khorasan, and Khorasan Razavi.

After only one of the projects was taken over by the private sector, the remaining projects were not well received due to inappropriate locations and undesirable physical progresses. Therefore, the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) took over 65% of the projects’ shares and the investors were absorbed through the IMIDRO. The organization’s most important move was to attract finance from the Metallurgical Corporation of China, as a state-owned enterprise in the country. However, the required letters of credit (LC’s) were not opened for some nine years mainly due to banking restrictions imposed on Iran as part of western sanctions imposed against the country over its nuclear energy program.

Although the infrastructural problems caused by inappropriate locations of the projects have not yet been solved, IMIDRO says the seven projects are all active and Iranian contractors and consultating companies are striving to start the sponge iron units as soon as possible.  While the sponge iron production will begin this Iranian calendar year (started March 20), IMIDRO has announced that all the seven plants will be fully in operation by the next three years, adding at least 6 million metric tons to the annual crude steel output. The seven steel plants are also said to create 7,000 direct and 35,000 indirect jobs.

Some of the plants, such as Sepiddasht in Chaharmahal Province, are facing water shortages while others like Sabzevar project, in Khorasan Razavi Province, face fundamental problems in supplying natural gas. According to the IMIDRO, the contractor for the Sabzevar project is supposed to be replaced.

Considering all these obstacles, it would take at least three years for those who are optimistic about the Provincial Steel Plants to see how efficient the plants will be in increasing steel output.