Economy, Business And Markets

Chabahar Port Development to Support Steel Industry

Chabahar Port Development to Support Steel IndustryChabahar Port Development to Support Steel Industry

Most Iranian ports are quite developed and well known.

Caspian Sea ports in the north of the country (Anzali, Amirabad and Noshahr) are predominantly involved in imports from neighboring Kazakhstan and Russia.

Anzali has an annual capacity of 8.5 million tons, according to Iran’s Ministry of Roads and Urban Development, and specializes in handling steel goods. In the southwest and south of the country, the network of ports is vaster.

Besides imports, Iran exports most of its goods through them, with oil accounting for around 80% of the total. The rest are chemicals and minerals, including iron ore and steel. Thus, the largest ports are located close to the main industrial centers of the country.

They are Bandar Imam Khomeini in the Persian Gulf and Bandar Abbas in the Sea of Oman, with 55 and 90 million tons of capacities respectively, Metal Expert, a Ukraine-based provider of news and analysis for steel products and steelmaking raw materials industries, wrote in a recent report dubbed “Iran in Focus”.

Chabahar, located in the south of Sistan-Baluchestan Province, is a relatively young but promising port, which has the potential of becoming one of the most important in the country.

Being the only Iranian port with direct access to the Indian Ocean, it has unique possibilities for handling deep sea cargoes. Once developed, it is expected to become the main trade and transit hub for Central Asia, South Asia and the Persian Gulf, which will make Iran a significant regional player.

Currently, Chabahar has the capacity to handle 8.5 million tons of cargoes per year, which Iran would like to increase to 12.5 million tons. To achieve this goal, Tehran has allocated an investment close to $340 million. Since foreign investors want to join the development of Chabahar, specialists voice greater optimism.

“Total cargo capacity of Chabahar Port will eventually stand at some 80 million tons,” Bahram Amir-Ahmadian, a professor at Tehran University, was quoted as saying by Turkish Weekly.

The list of countries willing to participate in Chabahar development is long and includes India, Japan, South Korea and China. The first, however, has strategic interest in Chabahar and will be the major promoter of projects with an expected investment of $20 billion.

The port will give India the opportunity to reach Afghanistan and Central Asia bypassing Pakistan, with which India has tense diplomatic relations. India is also eying trade with Europe via Chabahar and the International North-South Transport Corridor, enabling effective competition with China.

Compared to the current transport route via the Red Sea, Suez Canal and the Mediterranean, the Chabahar-based INSTC is estimated to be 40% shorter and will reduce the cost of Indian trade by 30%.

Chabahar, like other major Iranian ports, is already connected to the main cities of Iran by rail, but to reach Afghanistan, India plans to build $1.6 billion worth of the 500-km rail link between Chabahar and the border city of Zahedan. The road will be connected to the rest of Iran’s railroad network.

To implement these projects, India has already signed a deal with Iran for the supply of 250,000 tons of rails and plans to double the supply in 2016.

Chabahar also opens up the possibility of importing gas from Iran to India via Mundra Port along with enhanced trade and oil import opportunities. Important here is the South Asia Gas Enterprises’ undersea pipeline to bring gas from Oman and Iran to India. Besides that, the Free Trade Zone of Chabahar is expected to include petrochemical and fertilizer plants, LNG plant and gas cracker as well as other industrial complexes for metals and chemical processing.

Despite the fact that there are no exact estimates of the volume of steel needed for the development of Chabahar and its infrastructure, market insiders call it “a good place for steel consumption”.

Nevertheless, Iranian steel producers may play a secondary role in supplying the needs of the project.

“Since Delhi makes large investments in it, Indian sellers may have a upper hand and bigger chance to supply material there,” a market insider told Metal Expert.