Iran has ambitious plans for its steel industry, as it aims to become the world’s sixth largest steel producer, based on the 20-Year Vision Plan (2005-25), which stipulates the production of 55 million tons of crude steel per year.
Thinking big has always been on the agenda of Iranian steel officials. Devising plans to develop the sector dates back to 2004, during which the “Comprehensive Steel Plan” was first floated. The plan aimed to increase domestic steel production capacity to 28 million tons per year by 2010, the Persian sister publication Donya-e-Eqtesad reported.
Falling short of the target by about 4 million tons by the deadline, according to data from World Steel Association, officials in the Ministry of Industries, Mining and Trade, as well as those in the Iranian Mines and Mining Industries Development and Renovation Organization, revised the Comprehensive Steel Plan and sought to streamline steel projects and attract domestic and foreign investments to reach a fresh target.
Based on the revised plan, which is part of the Vision Plan, Iran’s steel output is projected to reach 55 million tons, while exports are expected to reach 20 million tons by 2025.
According to a presentation by Saghar Babaheydari, an analyst with Foolad Technic International Engineering Company, told the Sixth Iranian Steel Market Conference on Wednesday that Iran’s steel industry will fall short on various fronts in achieving its envisioned targets.
According to Babaheydari, the company’s experts were part of the team involved in revising the comprehensive steel plan.
Global Steel Outlook
The global steel industry is undergoing recession, Babaheydari said, adding that steel production showed a declining trend in every single month of 2015, with drops in China’s output being the main culprit.
The waning trend will continue, as the industrial behemoth announced last year that it intends to cut crude steel production by 100-150 million tons in 2016.
Noting that the slowdown in global economic growth has a direct impact on steel production worldwide, the analyst said, considering the falling oil prices, China’s shrinking economy and the fragile condition of emerging economies such as Brazil and South Africa, in addition to the after-effects of the 2008 financial crisis, the outlook for the global steel industry is not going to improve in the short run.
She also referred to plunging iron ore prices and said it is another factor negatively affecting steel prices.
Reality Check
In order for Iran to annually produce 55 million tons of steel, the country needs to boost the capacity of its sponge iron production from the current rate of 26 million tons to 58 million tons; increase pellet production capacity from the current 28 million tons to 88 million tons; while iron ore concentrate output capacity should grow to 53.5 million tons from the current 44, according to statistics presented by Babaheydari.
“Based on data provided by Iran’s Trade Promotion Organization on the country’s current export destinations and statistics, we believe Iran’s annual steel export potential will not be more than 7 million tons,” she said.
The analyst struck a positive note when expressing optimism that Iran’s steel consumption is expected to grow in the coming years, as the country begins to develop and expand its infrastructure.
Nonetheless, Babaheydari concluded that Iran’s annual steel consumption will stand at 34 million tons by 2025, provided the economic growth rate can reach 6% and the construction sector is revitalized.
ISMC 2016 Developments
ISMC 2016, hosted by Donya-e-Eqtesad, was attended by foreign companies seeking potential sectors for investment and cooperation, including German SMS Group, the Italian Danieli, the Spanish Sarralle and South Korea’s POSCO.
Top officials from Iran’s Ministry of Industries, Mining and Trade, Iranian Mines and Mining Industries Development and Renovation Organization and representatives of Iran’s major steel companies were also present.
“The German plant maker, SMS, plans to set up a service facility in Iran this year to be close to its customers for plant repair and manufacture after-sales components locally,” said Burkhard Dahmen, president and CEO of SMS Group in an interview with Platts in Tehran on Monday.
“The facility, the location of which has not yet been decided, will satisfy demand for local content in equipment supplies, which is asked for by both the government and investors.”
Dahmen added that SMS has already had an office in Iran for 35 years. The new facility will mean that SMS customers do not have to depend on imports of equipment and parts.
“SMS is currently bidding on supply of equipment to various steel projects in Iran,” Dahmen said.
One is for a new casting and rolling plant at Mobarakeh Steel Company. The plant is also in discussion on setting up a heavy sections mill to produce products for the construction industry.
“The German firm may also conclude a contract this year on plant supply to a new seamless pipe-making project to serve Iran’s oil and gas industries,” he said.
It may be located in Isfahan Province, or on the coast, at Bandar Abbas or Chabahar.
“Hormozgan Steel Company is planning to double its capacity to 3 million tons per year,” Dahmen said.
“SMS and Iran International Engineering Company supplied HOSCO’s plant with financing from European banks and Export Credit Assurance coverage.”
The SMS president noted that he is positive about steel capacity and market prospects in Iran following the recent lifting of economic sanctions on the country.
However, Dahmen indicated that the government’s target to more than double steelmaking capacity to 55 million tons per year by 2025 would be a challenge due to the need for more infrastructure.
The ISMC 2016 featured speeches made by Iranian governmental officials, steel market analysts and industry giants on the first day, and workshops and B2B meetings on the second day. The two-day conference came to a close on Wednesday.
