Over the past month, 110 steel mills have suspended production after the Ministry of Industries, Mining and Trade ordered them to lower their prices, according to Reza Shahrestani, a member of the board of directors of Iran Steel Producers Association.
Noting that the closures are temporary, he said the reduction in prices of steel products comes as prices of upstream industry products considered as feed for steel mills have been on the rise, ILNA reported.
“The 110 units that have suspended production are all smelting plants. Rolling mills are in a worse condition, as they are forced to produce at a loss because of their outstanding debts to banks,” he said.
Denouncing the policies of Industries Ministry, the official said steelmakers have been forced to first sell their products in the domestic market through the Iran Mercantile Exchange platform before they can export.
“The supply side is higher than demand in the domestic market. For instance, our steel ingot production is at 19 million tons [per year] whereas domestic consumption is only 12 million tons,” he added.
Decline in Apparent Steel Usage
Latest ISPA data show Iran's apparent steel usage registered a decline in the current Iranian year’s first nine months (March. 21-Dec. 21) compared with last year's corresponding period.
Apparent steel usage is defined as production plus imports minus exports, sometimes also adjusted for changes in inventories.
The apparent usage totaled 12.83 million tons for finished products, posting a 10% year-on-year decrease, according to the Iranian Steel Producers Association.
Long steel products accounted for the largest portion of finished steel consumption with 6.47 million tons, down 11% YOY.
Rebar grabbed the biggest share in this section with 5.16 million tons, down 13% YOY, followed by beams with 814,000 tons (down 3% YOY) and L-beam, T-beam and other types with 493,000 tons (down 2% compared with the same period of last fiscal year).
Flat steel products accounted for 6.26 million tons of finished steel apparent usage, down 7% YOY.
Among flat steel products, hot-rolled coil had the biggest share of apparent usage with 5.93 million tons (down 8% YOY), followed by cold-rolled coil with 2.06 million tons (down 6% YOY) and coated coil with 1.05 million tons (down 6% compared with the same period of last year).
The apparent usage stood at 15.91 million tons for semi-finished products, registering a 14% decline compared with last year's corresponding period.
The apparent usage of billet and bloom amounted to 9 million tons, down 17% compared with the same period of last year. The use of slab also decreased by 11% to 6.91 million tons during the period.
DRI usage stood at 22.93 million tons during the period under review, unchanged YOY.
Output Hit by Power Restrictions
The ISPA data show a marked decline in domestic steel production during the period under review.
Iranian steelmakers produced a total of 21.09 million tons of semi-finished products from March 21 to Dec. 21, down 8% year-on-year.
According to ISPA, billet and bloom made up 12.47 million tons of total semi-finished production, down 13% YOY.
Slab output reached 8.62 million tons to register a 2% decline year-on-year.
The output of finished steel decreased by 5% YOY to 14.72 million tons.
Long steel products had an 8.43 million-ton share in the output of finished steel products, posting a 3% decline compared with the similar period of last year.
Rebar production stood at 6.91 million tons (down 3% YOY). It was followed by beams with 912,000 tons (down 6% YOY) and L-beam, T-beam and other types with 610,000 tons (down 1% YOY).
Production of flat steel with 6.29 million tons registered a 9% YOY decline.
Hot-rolled coil comprised 6.19 million tons in this category, showing a 6% YOY decline, followed by cold-rolled coil with 1.86 million tons down 9% YOY and coated coil with 1.11 down 7% compared with last year’s corresponding period.
The output of direct reduced iron stood at 23.8 million tons during the period under review, up 2% YOY.
The decline in steel output is due to power outages and restrictions imposed on steelmakers in the past few months.
The Ministry of Oil and National Iranian Gas Company are putting pressure on steelmakers and mining firms to drastically cut gas consumption, according to a report by the Persian daily Jahan-e Sanat.
Specifically, Chadormalu Mining and Industrial Company has been asked to keep its gas consumption below 30,000 cubic meters per day until further notice. Since the quota is less than 1% of the heavyweight mining firm’s gas consumption under normal conditions, the restriction practically means cessation of production in Chadormalu, inflicting huge losses on lost production.
The report also noted that certain companies have been restricted for longer periods, while others will be less affected.
It noted that producers of direct-reduced iron are the prime target of new restrictions due to their energy-intensive nature, adding that since DRI is considered a strategic and key product in the steel industry, the measure will impact the entire steel production chain and lead to a massive decline in the output of steel products and rising prices in the market.
With the decline in temperature across Iran, gas consumption in households has set a record high. This is not the first time that industries, especially steelmakers, are facing power restrictions.
In the summer of the current fiscal year (July 23-Sept. 22), steel production declined 40% compared with the previous quarter (March 21-June 22) due to electricity cuts amid record high domestic consumption.
In a letter to the Supreme National Security Council, ISPA put steel mills’ losses due to power outages at $6 billion from the beginning of the current Iranian year (March 21) to Sept. 12.
According to ISPA, 82 days of productions were lost during the period due to power outages and 300,000 direct and indirect jobs were lost or restricted, the news portal of the association reported.
Summer demand led to a severe power and water shortage in summer in most regions, resulting in blackouts and dry taps.
The new record came as high temperatures nationwide drove general electricity consumption to new heights in summer, prompting authorities to prioritize domestic users over industries in supplying power.
As the manufacture of steel and cement is an energy-intensive process, their factories were restricted by the Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) and have been only allowed to work at a fraction of their demand during specific hours.
According to Tavanir Spokesman Mostafa Rajabi-Mashhadi, summer electricity restrictions for industries were removed as of Sept. 23.
World’s 10th Biggest Steelmaker
Latest data released by the World Steel Association show Iran’s steel output has declined, yet the country’s global standing remains unchanged.
Iranian steel mills produced a total of 28.5 million tons of crude steel in 2021, registering a 1.8% decline compared with 2020.
Iran's December output hit 2.8 million tons, up 15.1% year-on-year.
Despite the decline in output, Iran maintained its global status as the world’s 10th biggest crude steelmaker.
China was the world’s largest producer in the 12-month period with 1.03 billion tons of steel output, down 3% YOY.
It was followed by India with 118.1 million tons (up 17.8%), Japan with 96.3 million tons (up 14.9%), the United States with 86 million tons (up 18.3%), Russia with 76 million tons (up 6.1%), South Korea with 70.6 million tons (up 5.2%), Turkey with 40.4 million tons (up 12.7%) and Germany with 40.1 million tons (up 12.3%).
Iran is placed after Brazil (ninth) with 36 million tons (up 14.7% YOY).
The world’s 64 steelmakers produced 1.91 billion tons of steel in the year under review, up 3.6% YOY. Countries located in Asia and Oceania collectively produced 1.38 billion tons of the total.
The Middle East produced 41.2 million tons of crude steel in the period, posting an increase of 1.2% compared with the same period of last year.
Global steel output also experienced a 3% decline in December to 158.7 million tons.
Crude steel is defined as steel in its first solid (or usable) form: ingots and semi-finished products (billets, blooms and slabs). This is not to be confused with liquid steel, which is steel poured.
The World Steel Association is one of the largest and most dynamic industrial associations, with members in every major steel-producing country. Worldsteel represents steel producers, national and regional steel industry associations and steel research institutes. Members represent around 85% of global steel production.
The 64 countries included in this table represent 85% of global steel production.
Iranian steel mills produced a total of 29.02 million tons of crude steel in 2020, to register a 13.35% rise compared with 2019 and the highest growth among the world's top 10 producers.
