Economy, Business And Markets

Steel Industry Should Consider New Ways of Funding

Steel Industry Should Consider New Ways of Funding
Steel Industry Should Consider New Ways of Funding

The minister of industry, mine, and trade has advised  major manufacturers of granular iron ore not to solely rely on banking resources but instead focus on attracting investors, shareholders, and funds.

Mohammad Reza Nematzadeh highlighted steel manufacturers’ desperate need for 6 million tons of granular iron ore per annum, suggesting that an independent company should be established to supply the whole country with the product.

The minister urged the steel manufacturing sector to complete the production chain from extraction of the iron ore to the final production of steel billets.

“Traditional methods are no longer effective and we believe that production of granular iron ore should be standardized immediately.”

During the past few years, west’s anti-Iran sanctions forced Tehran to increase export of raw iron ore. But ever since the recent sanctions relief, the country has concentrated on minimizing the export of raw iron ore by boosting the national capacity to produce iron ore granules which is the main raw material used in steel plants.

In addition to shortage of iron ore granules, the steel industry faces other challenges, including a financial crisis following the implementation of the government’s plan to curb inflation, said Reza Shahrestani, a member of Iran’s Association of Steel Manufacturers.

Shahrestani added that the government’s recent policies in containing the inflation have significantly damaged steel manufacturers.

One such policy was to increase the interest rates for bank deposits which exceeded 25% and even 30% in some cases.

The CBI’s move towards unifying foreign exchange rate regime is another policy which has already impacted steel manufacturers.

Shahrestani noted that increasing interest  pushed the majority of the liquidity towards the banks as deposits and reduced the amount of incentives for the investors to inject their capital to the manufacturing sector.

Iran had introduced a 10% increase in taxes on exports of unprocessed iron, but last month the government decided to delay the plan until next March. The plan is aimed at gradually increasing the export duty to 20%.