Mining Holding Ownership Strengthens MSC’s Clout

Iran’s flagship flat steel producer has taken control of one of the country’s largest mining investment companies and extended its reach in the industry.

By holding a 37% stake in Mines and Metals Development Investment Company, Mobarakeh Steel Company won three seats on the mining holding’s board of directors during the extraordinary general meeting held on Saturday.

According to MMDIC’s website, the local mining and metals group established in 1997 focuses on exploring, mining, processing and marketing commodities such as iron ore, pellet, copper, steel, coal and electricity. The holding is a stakeholder in a number of Iran’s largest commodity producers.

Tehran Stock Exchange-listed MMDIC’s market capitalization currently stands at 37.2 trillion rials ($986.58 million), TSE data showed.

MMDIC owns a 16.6% and 17.1% stake in Iran’s two largest iron ore producers Chadormalu and Golgohar companies, and 5.7% share in the primary copper producer National Iranian Copper Industries Company.

Its other stakes across the industry are in Gohar Zamin Iron Ore Company, Khorasan Steel Company, Arfa Iron and Steel Company, Amir Kabir Steel, Sabanour Mining and Industrial Development Company and Shahid Ghandi Corporation Complex. The names of a few banks also show up on MMDIC’s portfolio.

What this means for MSC, already a goliath in the industry, is that it increases its potential influence on price determination for the long-term contracts for iron ore and pellet, as well as on export and other policies.

Golgohar and Chadormalu are already planning to commence the export of some of their pellet output this year, but are waiting to receive a government exemption from a 15% export duty on iron ore pellet. Golgohar started its second 5 million tons per year pellet plant last November and now has a nameplate capacity of 10 million tons per year, S&P Global Platts reported. With MSC in charge, however, the plans could change.

MSC came into MMDIC’s ownership following the financial hardships of the founder and original stakeholder, the semi-governmental Steel Pensioners’ Fund for retired Iranian steelworkers. The pension fund sold a 16.1% stake valued at 7 trillion rials ($185.7 million) to MSC back in May.

MSC is also following plans of its own for boosting output, as it has turned to Iran Energy Exchange for procuring its electricity supply.

“Considering the significant price difference between offers by the private sector in IRENEX and the government, Mobarakeh Steel Company purchased 10 MWs of electricity from the exchange for the first time in the company’s history. This in turn led to a 36% drop in costs,” MSC’s raw material and energy procurement manager, Bashir Sadeqi, was quoted as saying by Securities and Exchange News Agency.

According to Sadeqi, the benefits of the new approach include flexibility in delivery time, 10% tax cut on purchases from IRENEX and the ability to circumvent middlemen and directly pay the supplier.

MSC posted a good performance in the last fiscal year (March 2016-17) as it boosted sales volumes by 18.21% to 6.2 million tons.

The sales total included 4.49 million tons of hot-rolled coil, 1.29 million tons of cold-rolled coil and 284,000 tons of coated products. MSC’s total nominal capacity is 10.3 million tons of finished and semi-finished products. The rise in sales volume combined with higher prices also more than tripled net profit to 17.82 trillion rials ($550.46 million).