India's giant steelmaker Essar Group is planning to invest $2.37 billion on building a steel plant in Iran, according to managing director of Persian Gulf Special Economic, Industrial and Mining Zone, Masoud Hendian.
Initial negotiations have been concluded between PGSEZ and Essar Group, the official told Forsat-e-Emrouz newspaper on Saturday. "The PGSEZ has even located a 400-hectare land for building the steel plant."
Essar Group is an Indian multinational conglomerate with investments in steel, energy, infrastructure and services sectors. Essar currently has regular business relations with Iran's major steel companies, including Mobarakeh Steel Company in Esfahan.
In 2007, Essar held talks with Iranian authorities to build an oil refinery in Iran, but backed away from its proposed plans because of western sanctions imposed against Iran over its nuclear energy program, as reported by Forbes.
But now the company looks set to invest in Iran's steel sector. According to Hendian, the Indian company plans to invest $320 million for producing 5 million tons of iron ore pellets per year; $1.6 billion on annual production of 3 million tons of crude steel and $450 million on building a 500-megawatt power plant in the Persian Gulf Special Economic Zone.
The investments, once made, would be considered the biggest foreign investment in Iran's mining industry since the country came under sanctions.
Essar's commercial relations with Tehran started in 2013 when it exported steel in exchange for a share of India's oil dues to Iran. Based on the payment mechanism proposed by the National Iranian Oil Company, the Indian company settled $1 billion of the proceeds tied up in India under western sanctions.
Iranian steelmakers had criticized Essar's move, describing the Indian company's decision to export its steel in exchange for Iran's frozen oil revenues as an opportunistic move to get rid of huge amounts of piled-up steel when the global steel market was suffering. The Iranian Steel Producers Association had warned the government that if it continued importing Indian steel, the domestic steel sector would face serious problems.
But the new proposal by Essar to build steel processing facilities in Iran rather than exporting steel could benefit Iran by helping it balance the steel production chain. Iranian steelmakers are currently suffering from shortage of raw materials such as iron ore concentrate, iron ore pellet and sponge iron.
Establishing the steel plant in the Persian Gulf Special Economic Zone would help create thousands of new jobs in the southern Hormozgan Province. The plant's strategic location near the port city of Bandar Abbas would also provide domestic steel producers with cheap and easy access to raw materials via railroad.
