ESCO Launches Delayed Rail Manufacturing Line

Esfahan Steel Company has launched its long-delayed rail manufacturing line, as many criticize the government for the import of rail tracks over perceived damage to the fledgling homegrown industry.

On Tuesday, ESCO signed a contract with Islamic Republic of Iran Railways to produce 40,000 tons of rail, 10,000 of which will be delivered by the end of the current Iranian year, Mehr News Agency reported.

The Ministry of Industries, Mining and Trade, Ministry of Roads and Urban Development, and ECSO teamed up two years ago to promote the so-called “National Rail Project” to reduce reliance on imported rails.

The project, however, was delayed due to recession in the domestic steel market, ESCO’s lack of liquidity and IRIR’s refusal to pre-purchase the steel tracks.

Late August, IRIR President Mohsen Pourseyyed Aqaei said ESCO’s delay in supplying the country’s growing demand created a shortage in the market. “There is not enough rail to meet the growing needs of our railroad projects.”

Initial plans to produce domestic rail go back 10 years when the former government thwarted a deal to import 100,000 tons of rail from Spain, arguing that imports should be curbed so that demand is met via domestic manufacturers.

Taking advantage of the new investment climate resulting from the lifting of economic sanctions imposed by the West on Iran over its nuclear energy program, the Islamic Republic is taking serious steps to expand its underdeveloped rail network. This, in turn, has created a huge demand for rail in the Iranian market, where Turkey, India and China are jockeying to increase their market share.

Turkish steel producer Kardemir has recently shipped 10,000 tons of rail to Iran as part of an €80-million contract to export 140,000 tons of rail, according to the company’s CEO Mesut Ugur Yilmaz.

Yilmaz said his company has so far produced 40,000 tons of rail as per the contract.

The neighboring country signed the contract with Iran in April to barter Turkish rail in exchange for Iranian oil to be supplied to Turkish Petroleum Refineries Company.

India has also signed agreements to supply rail to Iran. Back in August, New Delhi-based steel and energy company Jindal Steel and Power Limited shipped the first consignment of 1,700 tons of rails out of a total order for 150,000 tons to Iran.

The export of rails by Indian steel companies to Iran is seen as part of the pact between the two countries to develop railroads and other infrastructure at the strategic Chabahar Port in southern Iran.

New Delhi-based engineering and construction company IRCON International Limited is also building a rail line at Chabahar to move goods to Afghanistan.

China has exported 40,000 tons of rails to Iran during the first six months of the current Iranian year (started March 20), the Islamic Republic of Iran Customs Administration reported.

Chinese companies have invested billions in construction of Iran’s railroad projects.

The imports come alongside efforts by major Iranian steel firm Esfahan Steel Company to produce rail domestically.

According to Minister of Roads and Urban Development Abbas Akhoundi, by 2021, Iran needs to build 1,500 kilometers of railroads, for which it needs 1.8 million tons of rails.

Iran’s sixth economic development plan (2016-21) stresses, among other things, the need to develop the rail transport network.

Tehran has signed several agreements with international companies to start new railroad projects and expand and upgrade the existing routes.

Construction of a high-speed train between Tehran and Isfahan, as well as the ongoing rail project to connect the cities of Rasht and Astara as part of the International North-South Corridor, are among these projects.

The Islamic Republic of Iran Railways says Iran needs an average of 300,000-400,000 tons of rail per year to meet the needs of this key transport sector.

The 20-Year Vision Plan (2005-25) stipulates that the number of passengers using rail transport will increase from the current 25 million to 65 million per year.