Iran's Steel Industry Keeps Foot on the Pedal, but Sanctions Outcome Could be the Decider

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Iran's steel production grew 5.9% from 2013 to 16.33 million tonnes in 2014, according to the World Steel Association (Brussels, Belgium). For the first two months of 2015, steel production in Iran rose 15.6% to 2.77 million tonnes, from 2.4 million tonnes a year earlier.

Iran was the 14th-largest steel producer in the world last year, according to the World Steel Association. Following the negotiations on Iran's nuclear future and the possible easing of trade sanctions, the coming months will provide a good indication of whether Iran's steel production target of 55 million tonnes a year by 2025 is attainable.

Iran is the Middle East's biggest auto maker. Steel is a fundamental sector for the country, with its major oil and gas industry operating under-capacity because of sanctions.

There are headwinds for Iran's steel sector, with reported imports exceeding exports. The sector is under a growing threat of product dumping from China, Russia and Turkey.

The government has imposed tariffs of 10% to 20% and cancelled foreign currency offers at preferential rates on imports in order to protect the sector. The high cost of iron ore production, compared with the rest of the world, also has been a drag on production ambitions and costs, which could be mitigated with the easing of sanctions.

One key problem lies in the size of production units. "It is unfathomable that instead of establishing units with a capacity above 5 million tonnes, we have built medium-size plants," said Bahram Sobhani of the Iranian Steel Manufacturers Association.

Iran is home to the biggest steel mill in the Middle East, the Mobarakeh Steel Company, with an annual production of 7.2 million tonnes. But the majority of the country's private steel plants, with a production capacity of less than 100,000 tonnes, are spread throughout the country.

For related information, see January 12, 2015, article - Iran Leads Middle East Steel Production, Expands Exports, and February 4, 2015, article - South Korea's POSCO Puts FINEX Technology at Heart of Iran's Steel Production Drive.

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