Economy, Business And Markets

World's Largest Steelmaker to Invest in Iranian Complex

World's Largest Steelmaker to Invest in Iranian Complex
World's Largest Steelmaker to Invest in Iranian Complex

The world’s largest steelmaking company, ArcelorMittal, is going to invest in Iran’s steel industry after the Luxemburg-based giant signed a contract with Bonab Steel Industry Complex, a subsidiary of Iran’s Tourism Financial Group.

The contract entails the takeover of the Iranian plant’s management and production operations for five years.

It will provide the Iranian plant with cutting edge production technology and improve steelmaking efficiency, in addition to boosting the company's marketing capabilities by connecting it to ArcelorMittal’s vast steel network, Donya-e-Eqtesad reported.

Mahan Industries and Mines Development Corporation, a subsidiary holding of Tourism Financial Group, has also signed a deal with ArcelorMittal to jointly invest in the exploitation of an iron ore mine in Kerman Province and establish a direct reduced iron production plant as part of the Bonab steel complex agreement.

Bonab Steel Complex, founded in 2005, became one of Iran’s largest private steelmaking companies after a merger with several major hot-rolling and melting companies.

ArcelorMittal was created after the takeover of western European steelmaker Arcelor (owned by Spain, France and Luxembourg) by Indian-owned multinational steelmaker Mittal Steel in 2006, at a cost of €40.37 per share, worth approximately $33 billion. Mittal Steel launched a hostile takeover bid that replaced a previous planned merger between Arcelor and Severstal, which had lacked sufficient shareholder approval.

The resulting business was named ArcelorMittal and has been producing approximately 10% of the world's steel, rightfully earning it the title of being the world's largest steel company.

The chief executive of ArcelorMittal is now on the back foot, however, as the powerhouse created by the mega deal is grappling with some of the worst conditions in the global steel market for more than a decade.

The company reported last month that its net losses increased more than sevenfold last year to $7.9 billion.

The steelmaker has now turned to cost-cutting measures by focusing on higher value steel products, such as steel for cars.

  Global Post-Sanctions Inflow

Iran’s promising steel market has proved to be increasingly attractive for global players following the removal of sanctions imposed on Iran over its nuclear energy program, as steelmakers from Italy, Germany, Spain and South Korea have already consolidated a foothold in the sector.

During the visit of President Hassan Rouhani and his accompanying high-ranking delegation to Italy in January, Danieli Group signed deals worth $6.2 billion with the Iranian Mines and Mining Industries Development and Renovation Organization for cooperation in the steel and aluminum sectors.

The Italian company, in a joint venture with IMIDRO, will establish the “Persian Metallics” company in Iran to produce about 6 million tons of pellets per year and bring Iran close to self-sufficiency in procurement of the raw material.

The South Korean industrial heavyweight POSCO signed a memorandum of agreement with the Iranian steelmaker Pars Kohan Diar Parsian Steel Company (PKP) worth $1.6 billion during the South Korean Minister of Trade, Industry and Energy Joo Hyung-hwan’s visit to Tehran in late February.

As part of the deal, POSCO will provide PKP with the modern, cost-efficient FINEX steelmaking technology.

The Spanish Sarralle Group is also currently implementing slab and advanced steel sheet production projects in Arvand Jahan Ara Steel Company, and the German SMS Group, a world leader in manufacturing steelmaking machinery and equipment is also establishing electric arc furnaces at Mobarakeh, Khuzestan and Saba steel companies.

Steel demand in the construction and auto manufacturing sectors is set to rise substantially in the next few years, making investment in Iran a highly lucrative bet.