Economy, Business And Markets

Steel Production Up 50% in 6 Years; Still Behind Schedule

Steel Production Up 50% in 6 Years; Still Behind Schedule
Steel Production Up 50% in 6 Years; Still Behind Schedule

The latest 2014 report by the World Steel Association shows Iran is slightly behind its rising growth trend in production of crude steel, despite a significant 50% production growth during the past six years.

According to the report, by October 2014, the country produced 12.06 million metric tons of crude steel while the figure was 15.4-million tons during the entire year 2013. The increase from 10 million tons in 2008 is in line with the country's Five-Year Economic Development Plans and also with the 20-Year Vision Plan on a larger scale. According to the Vision Plan, the country should annually produce 55 million tons of steel by 2025.

If the production growth remains at the current pace, the production is expected to stand at around 30 million tons per annum by 2025, which would not meet the objectives of the Vision Plan. Therefore, the only remaining option for the administration is to significantly increase production.

However, there are insurmountable barriers ahead, Morteza Aqajani, the general manager of Hormozgan Steel Company (HOSCO), told IRNA.

Aqajani said President Hassan Rouhani's comments in March encouraged many to invest in Hormozgan province, considering the advantages of the province including its proximity to international waters as well as to Shahid Rajaee Port, which is a special economic zone. The province also enjoys an exclusive loading and unloading pier, and is in the vicinity of Gol-e-Gohar iron ore mine.

Rouhani introduced Hormozgan province, which is next to the Persian Gulf, as the country's steel production hub which produces 10 million tons of steel per year.

According to HOSCO head, however, the lack of raw materials is a major obstacle in the way of achieving the aforementioned goals. Aqajani said the Gol-e-Gohar company had better develop the mines and provide the raw material instead of expanding steel plants.

Gol-e-Gohar owns mines of iron ore located 50 kilometers away from the southern city of Sirjan in Kerman province, offering magnetite iron ore concentrate, grinded-hematite, and iron ore pellets.

The issue of raw material has long been a concern in the country's steel sector, as the minister for industry, mine, and trade recently raised alarm about the shortage. Mohammad Reza Nematzadeh said the country needed to annually produce at least 6 million tons of iron ore pellets in order to respond to domestic steel plants' growing demand.  

Banking sanctions over the past few years have also created numerous problems for the exporters regarding transaction of money and opening the letters of credit (LC). Manufacturers have also had trouble importing parts for their machinery.

Another blow to the steel sector during the past two years was the economic downturn in the housing sector, which dramatically reduced the domestic demand for steel and consequently domestic production and imports dropped.

But despite all the threatening factors, the country's steel production has constantly experienced growth in terms of production capacity. The country produced 13.2 million metric tons of crude steel in 2011 and the figure stood at 14.5 and 15.4 million tons in 2012 and 2013 respectively. This, definitely, is considered progress regarding the fact that many countries including Japan, the US, Russia, Germany, and Italy have seen decline in their steel production over the past six years. The world crude steel production reached 1,607 megatons in 2013, up by 3.5% compared to 2012.

Based on the 20-Year Vision, Iran should focus all its efforts to increase production of steel by overcoming the shortage in iron ore pellets and iron ore concentrate. If the administration is able to develop the infrastructure to produce the raw materials, the country then will not have to export a considerable portion of its iron ore, which results in nothing but financial losses for the national economy.