Economy, Business And Markets

Domestic Steel Industry Plagued by Rampant Imports

Domestic Steel Industry Plagued by Rampant Imports Domestic Steel Industry Plagued by Rampant Imports

Unrestrained imports of steel products are one of the main impediments to the domestic steel industry’s growth, says the sales manager of Mobarakeh Steel Company, Mahmoud Akbari.

Over 3 million tons of steel products were imported during the nine-month period of the previous Iranian year (March-December 2015), indicating an 86% rise compared with the same period of 2014, according to the latest data from Iran Steel Producers Association.

The hike in steel imports, coupled with the ongoing recession in the domestic construction sector, have lowered demand and forced many domestic steel producers to operate below capacity.

According to Akbari, flat steel producers operated at only 53% capacity last year and MSC, Iran’s largest flat steel manufacturer, cut down its production for the very first time in the company’s history.

Mobarakeh Steel Company, located in the Isfahan Province and accounting for production of over 45% of Iran’s steel products, is the largest manufacturer of the industrial material in the Middle East and North Africa region.

Pointing to the lingering effects of the global steel recession, which overwhelmed the industry back in 2015, Akbari says domestic producers have already faced the double-whammy of freefalling global steel prices and rising energy prices at home.

“The current unfavorable conditions of the domestic steel sector and the market will most likely challenge the realization of goals envisioned for the steel industry in the 20-Year National Vision Plan (2005-2025). Struggling to maintain sales in the domestic market, local producers will find it difficult to expand their production capacity,” he said.

The vision plan entails an increase in steel production to 55 million tons by 2025.

The most widely-used means to protect domestic industries against unfair foreign competition is imposition of import tariffs.

The Iranian government’s efforts to protect its steel industry started in 2014. During the first months of the year, a 4% import tariff rate was slapped on alloy steels, 10% on steel sheets and 15% on other flat products.

The measures proved to be inadequate and the government proceeded to bar steel importers from using special exchange rates–offered in special circumstances as opposed to market rates–in early 2015.

Following further pressure by steel producers, import tariffs on various steel products were jacked up to reach 20% this year.

Many market players, including Akbari, believe the government took the right measures at the right time, but did not go far enough with it, considering that other steel producing countries have imposed massive import tariffs on steel products to protect their domestic industries. The United States, for instance, also recently introduced punishing tariffs on steel imports from China.

Imports of steel into the US from China have been hit with 522% trade tariff, as tensions in the global trade market increase. The US Commerce Department has increased import duties on cold-rolled flat steel fivefold as it hits back at what it says is Beijing subsidizing its largely state-owned steel industry, which is dumping excess production on global markets.

Chinese steel coming into the US now faces a 266% anti-dumping levy and a 256% anti-subsidy duty, The Telegraph reported last week.

  Crude Steel Output up 1.5%

Despite the global setback in steel production by nearly all major manufacturers, Iran posted a robust rise in crude steel output in the first four months of 2016.

According to data from World Steel Association, about 5.5 million tons of crude steel were produced in the country from January to April, indicating a 1.5% growth in production volume compared with the same period of 2015.

The output in April stood at its monthly high of 1.5 million tons, up 7.8% compared to last year’s similar month.

This is while the industrial behemoth, China, recorded a 2.3% drop in its 2016 crude steel production volume with 261 million tons. Japan, South Korea and the European Union also followed suit, with the two Asian countries posting a 2.3% decline and European Union’s production sinking 6.5% compared to 2015.

Meanwhile, Ajabshir Steel Complex, located in East Azarbaijan Province, has resumed production after it was forced to close down in the last Iranian year (March 2015-16) amid recession, IRNA reported.

The steel mill began operation on Saturday and is set to produce 1,000 tons of steel ingots per year to meet the provincial demand, the report added.

The company was established in 2008 and became operational three years later.