Iranian Steel Producers Association (ISPA) has announced that if the government accepts the Indians’ proposal to import steel in exchange for part of the oil money New Delhi owes Tehran, it would be the final blow to the country’s steel sector, reported Fooladnews.
Reza Shahrestani, an ISPA member, criticized the Indian company, Essar, for putting forth the proposal, accusing it of “blatant opportunism”. He said under the current situation and when the global steel market is experiencing a downtrend, the Indian company is taking advantage of the situation to tap frozen Iranian oil revenues to pay for its steel exports to Tehran.
India’s Essar Group says it imported oil from Iran in its normal course of business and paid for it in line with an agreement between Iran and India.
In August this year, the National Iranian Oil Company (NIOC) proposed the payment mechanism aimed at opening a new way to release oil export proceeds tied up in India under western sanctions over Tehran’s nuclear energy program.
Supplying steel to Iran is “prohibited”, while dealing with NIOC “is very likely to fall foul of European Union and U.S. sanctions legislation,” said Jonathan Moss, partner and head of marine and trade at law firm DWF in London.
At a November 3 meeting at India’s oil ministry, which included the commerce and finance ministries and oil refiners, agreement was reached in principle on the deal, subject to final government approval, oil ministry sources said.
According to Reuters, companies like Essar adhere to the western sanctions against Iran, though, to avoid any negative fallout for their US businesses. In 2007, Essar, which owns a steel plant in Minnesota, backed out of plans to invest in Iran’s energy sector following US objections.
Higher Import Tariffs
Meanwhile, Shahrestani pointed to the gloomy condition of the domestic steel market, saying while Turkey has imposed a 40% tariff on its steel imports and the US and European countries have also imposed tariffs in order to protect their domestic steel industries, the steel import tariffs in Iran stands at only 4%.
Shahrestani mentioned the negotiations with the ministry of industry, mine, and trade during which the steel producers have proposed raising import tariffs up to 20%. However, he said, the ministry has not yet responded to these calls.
Currently, all the steel mills in the country are working at hardly 30% capacity, while the melting plants produce only 50% of their nominal output because, according to steel market experts, steel production under the current situation is not economical. This year, at least 15% of the production by the steel manufacturing units goes into depots and a considerable number of steel plants are always facing the threat of going defunct.
More than 2 million metric tons of steel was imported during the current Iranian calendar year (started March 21) and another 1.5 million metric tons is expected to be imported by the yearend (March 20, 2015), official data shows.
Iran’s total steel production is expected to top 17 million metric tons this year, while the country’s 20-Year Vision Plan specifies that the steel output should reach at least 52 million metric tons per annum.
This, however, seems to be a far-fetched objective, as the domestic steel industry is in dire need of up to 9 million metric tons of iron ore pellets, as the main raw material used in steel production process.
