Economy, Business And Markets

Provincial Steel Projects to Gain Pace

Provincial Steel Projects to Gain PaceProvincial Steel Projects to Gain Pace

Sponge iron production units in three out of seven major steel plants, known as Provincial Steel Projects, are expected to become operational by the end of the current Iranian year on March 19, 2016, through Chinese financing, said Mehdi Karbasian, deputy minister of industries, mines and trade and head of the Iranian Mines and Mining Industries Development and Renovation Organization.

Karbasian made the remark in a meeting with Shi She, a representative of the Metallurgical Corporation of China, which has pledged to invest €1.8 billion in the steel projects, IRNA reported

The official expressed optimism that the sponge iron units of the remaining four steel plants will also become operational by December 2016.

Karbasian said the Chinese company has agreed, with Iran’s recommendation, to import the machinery and equipment from Europe.

The IMIDRO head called on Iranian and Chinese contractors to hold regular meetings to resolve the challenges facing the projects and accelerate their execution.

The seven projects are planned in Sepiddasht in Lorestan Province, Neyriz in Fars Province, Qaenat in South Khorasan Province, Shadegan in Khuzestan Province, Mianeh in East Azarbaijan Province, Sabzevar in Khorasan Razavi Province and Baft in Kerman Province. Each of the proposed steel projects is expected to produce from 800,000 to 1 million tons of crude steel annually.

The proposal for construction of steel plants dates back to 2006 when the government decided to set up eight steel plants in different provinces. All but one of these projects failed to attract private investments due to lack of sufficient feasibility studies prior to selection of their locations. Thereafter, IMIDRO took over 65% of the projects’ shares and started looking for investors.

The organization’s most important achievement so far has been to attract finances from the Metallurgical Corporation of China, a state-owned enterprise providing metallurgical engineering contractor services worldwide. However, opening the letters of credit delayed the projects by about nine years mainly due to banking restrictions imposed against Iran as part of the western sanctions over Iran’s nuclear energy program.

While infrastructural problems caused by the projects’ inappropriate locations remain unsolved, IMIDRO says Iranian contractors and consulting companies are working to complete the sponge iron units as soon as possible.

A recent study by the Parliament Research Center showed that some of the steel plants under construction are infeasible and expected to yield zero investment returns. The steel plant in Sepiddasht, for example, is faced with water shortage while Sabzevar’s project faces problems of gas supply.

The Chinese company’s preliminary studies have resulted in revising some of the plans. Shi She said Money and Credit Council is willing to launch the projects immediately, adding that Sabzevar plant has been found more suitable for producing thin slabs instead of billets.

Based on the 2025 Vision Plan, Iran aims to increase annual crude steel production capacity to at least 55 million tons from the current 23 million within the next decade. Last year, the country produced more than 16.6 million tons of crude steel while production is expected to hit 18 million tons during the current year.