70519
One factor causing a drop in Chinese steel in Iran is their rising prices.
One factor causing a drop in Chinese steel in Iran is their rising prices.

China’s Troubled Relationship With Iranian Steel Industry

China is now gone as a destructive market force, as it operates in Iran in the same capacity as other foreigners, trying to gain a foothold but prevented by adverse factors
Two years ago, Chinese steel companies had a significant share in Iran’s steel market reaching up to 20%, but now it’s hardly one-fourth

China’s Troubled Relationship With Iranian Steel Industry

Chinese steel was everywhere in the world for the good part of the past few years. Disheartened Iranian producers were unable to compete with low prices and downstream users sidestepped local suppliers to lower their production costs.
It proved to be a dreary time for both sides. Steelmakers entered survival mode by dialing down output and turning to exports, and users complained about the low quality of most Chinese offerings. All the while, there was more steel around than could be used.
Seemingly putting an end to this confusion in the markets was the new trade protectionism era creeping forward. Wielding import and export control mechanisms, governments around the world propped up heavy barriers against Chinese steel to protect their industries. Even now, any allegations of dumping will be anathema for the exporting country.
Things have been the same in Iran. Steelmakers’ intensive lobbying bore fruit and taxes levied on Chinese steel caused imports to continuously shrink for the past two years.
However, there are more subtle nuances at play nowadays. Local demand is subdued due to a slowdown in the construction sector and producers still prefer exports over domestically-made products as lingering banking sanctions prove troublesome for trade and investment.
China is now gone as a destructive market force, as it operates in Iran in the same capacity as other foreigners, trying to gain a foothold but prevented by adverse factors.
“Two years ago, Chinese steel companies had a significant share in Iran’s steel market reaching up to 20%, but now it’s hardly one-fourth of that,” Daniel Mu, steel trade manager at Xiamen C&D Inc, told Financial Tribune in an interview on the sidelines of the 17th International Exhibition of Construction Industry held in Tehran’s International Fairground from August 12 to 15.
Xiamen C&D Inc is a service-oriented enterprise specializing in supply chain operation and real-estate development. Its operations in Iran, which first started 10 years ago, include exports of flat steel and square bars alongside the import of iron ore.
According to Mu, the Chinese company purchased almost half of Iran’s iron ore exports in 2016 and exported 150,000 tons of steel products valued at $75 million to Iran.
Iran exported 21.19 million tons of iron ore worth $818 million in the last fiscal year (ended March 20, 2017). It imported 4.01 million tons of semi-finished and finished steel products valued at $2.53 billion during the same period.
Mu noted that business in Iran’s steel market is experiencing a marked downturn due to the lifeless construction sector.
And as steel is mostly used as a structural material or in the production of advanced goods such as high-speed rails, the outlook is not so bright.
“I personally do not see things improving as a foreigner surveying the Iranian market,” he said.
Before the ongoing slump hit the sector, Iran’s structural material producers experienced a lengthy boom period owing to the ill-famed Mehr Housing Project—a large-scale construction program initiated in 2007 under former president, Mahmoud Ahmadinejad to provide 2 million low-income people with housing units through free land and cheap credit.
The project’s progress slowed down, however, due to lack of funding and dragged down demand for construction material with it to date.
Reviving the sector has been one of the main talking points of government officials, but is yet to see any concrete action. The government’s concerns with controlling inflation and limited budget due to low oil prices have weakened the prospects of fresh liquidity entering the construction market.
Another factor causing a drop in Chinese steel in Iran is their rising prices.
According to Mu, prices have increased sharply after the government decided to shut down a number of small- and mid-sized steel mills due to environmental and overcapacity concerns. He pointed to shipping costs as another contributing factor, which has led Iranian buyers to prefer imports from Ukraine and Russia.
Accordingly, Xiamen C&D Inc is going to focus only on supplying high value-added products such as pre-painted and corrugated steel and tinplates to Iran.
“More commercial goods will not have a chance of penetrating the market due to their price,” Mu said.
This is while sanctions by the United States on banking transactions with Iran have spooked many investors and traders, Xiamen C&D included.
“Last year, we had plans to invest in constructing a steel plant in Iran. But after careful investigations, we changed our mind,” Mu said, adding that many Chinese banks refuse to work with them when Iran’s name is involved.
It is the same with iron ore purchases from Iran, as “the prices are very competitive but the problem is with payment”, he added.
So how does steel and iron trade with Iran work?
According to Metal Bulletin, Iran’s name is never mentioned in the sales contract or bill of lading. The cargo is loaded in a vessel in Iran but the ship first goes to a nearby country such as the UAE before it heads to its final destination. The bill of lading will have either this country or a general “Persian Gulf” stated as the origin of the cargo.
That might be too much of a hurdle, but it seems to be working for now.

 

Short URL : https://goo.gl/yw6RD8
  1. https://goo.gl/C6ph5a
  • https://goo.gl/PVr1ip
  • https://goo.gl/jxdwrU
  • https://goo.gl/a1niew
  • https://goo.gl/pVDdTa

You can also read ...

Oberbank Deal to Trigger European Finance Flow
The chief executive of Oberbank–whose bank this week became...
Apparel tops the list of goods smuggled into Iran.
The Ministry of Industries, Mining and Trade has introduced...
SCI Puts Inflation at 8%
The goods and services Consumer Price Index in the 12-month...
Unwanted Mehr Housing Units to Be Repurposed
With the aim of bringing to a close the protracted and...
Proton Dissolves Dormant Subsidiary in Iran
Malaysian industrial group DRB-Hicom Berhad, the owner of...
VW Seeking Long-Term Cobalt Supplies in Shift to Electric Cars
Germany’s Volkswagen is moving to secure long-term supplies of...
CBI Tweaks  FTZ Rules
In its latest directive to the banking system, the Central...
Volvo XC40 Goes Small and Upscale
The 2019 Volvo XC40 combines an eye-catching exterior, a fresh...

Add new comment

Read our comment policy before posting your viewpoints

Image CAPTCHA
Enter the characters shown in the image.

Trending

Googleplus