Iran's International Steel Output Ranks 10th in Jan.

EghtesadOnline: Iranian steel mills produced a total of 2.23 million tons of crude steel in January 2019, down 2.6% compared with last year’s corresponding period, the latest report released by the World Steel Association shows.

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02 March 2019

Iran has been ranked the world’s 10th biggest producer of steel during the month. The country is placed between Turkey (ninth) with 2.56 million tons and Taiwan (11th) with 2.01 million tons, the Brussels-based international trade body for the iron and steel industry added.

The world’s 64 steelmakers produced a total of 146.63 million tons of steel over the month, up 1% year-on-year.

China was the world’s largest crude steel producer with 75.01 million tons of output, up 4.3% YOY. It was followed by India with 9.18 million tons, Japan with 8.14 million tons, the United States with 7.64 million tons, South Korea with 6.21 million tons, Russia with 5.79 million tons, Germany with 3.41 million tons and Brazil with 2.93 million tons, according to Financial Tribune.

Iran’s crude steel output stood at 24.52 million tons in 2018, according to Worldsteel, up 17.7% YOY.

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 report shows global direct-reduced iron output increased 5.9% year-on-year to 7.51 million tons in January.

Iran was the second biggest producer with 2.53 million tons of DRI production in January to register a 35.9% YOY growth.

India, Iran's primary rival in DRI output, reduced its one-month production by 7.3% YOY to 2.62 million tons.

The largest decline was in Venezuela, where output decreased 40.8% YOY to 20,000 tons.

Iran aims to become the world’s sixth largest steel producer as per the 20-Year Vision Plan, which targets an annual production capacity expansion to 55 million tons and 20-25 million tons of exports per year by 2025. Iranian steel mills have so far realized over 30 million tons of the capacity target.

The country has been working to increase its iron ore processing capacity, including both DRI and hot-briquetted iron production to feed its steelmaking expansion target.

Impact of US Sanctions

UK-based analysts in Fastmarkets say the new round of US sanctions against Iran are expected to cut Iranian steel exports, gradually leading to lower Iranian steel output.

Although the sanctions are largely directed at the country’s oil and banking sectors, it is also expected to aggravate its export steel market, which had already been impacted by the previous set of sanctions imposed by US President Donald Trump’s administration in early August.

Trump announced his decision to pull out of the nuclear deals Iran signed with world powers, including the United States, in May and reimposed the latest round of sanctions in November.

Shipping problems are said to be a major issue at present. Under the circumstances, Iranian steel exporters have had to cut prices significantly to attract customers and to compensate for the risks involved in trade with the country.

Latest data released by the Iranian Mines and Mining Industries Development and Renovation Organization show major Iranian steelmakers exported a total of about 4.71 million tons of semi-finished and finished steel products during the 10 months to Jan. 20 to register a year-on-year decline of 19%.

Steel mills shipped out 349,597 tons during the tenth month of the year (Dec. 22-Jan. 20), which shows a 49% decline compared with the same month of the previous year.

Iran's steel exports, among other commodities, were pressured after the imposition of US sanctions last year.

According to Chairman of Iranian Mines & Mining Industries Development & Renovation (IMIDRO) Khodadad Gharibpour, Iranian steel industry is an export-oriented one and sells more than 40% of its output overseas.

"I think that’s the key question for every Iranian steel producer because export is one of the most important ratios in their production because on one side consumption within Iran is not growing fast enough to feed all the nominal capacities coming up and on the other side you have not only sanctions form the US, you also have anti-dumping," Joachim Schroder, chairman of RCG Research & Consulting Group AG, said.

Schroder was speaking with Financial Tribune on the sidelines of the opening of the ninth edition of Iranian Steel Market Conference, also known as ISMC 2019, in Tehran.

The European Union announced definitive anti-dumping duties on the import of hot-rolled coil from Iran and three other countries in October 2017.

"I think there are solutions. There are still markets in Africa and Southeast Asia, which have insufficient domestic production so there are some selective markets still open. That’s one way and the other way I think is to look for cooperation because the big asset of Iranian steel industries that are together with CRS [cold-rolled sheet] producers [is that] they have the cheapest production cost and that is something where you can probably develop your business model," Schroder said.

"Say, you ship semi products like slabs or billets, and then you cooperate very close with steelmakers because most of the countries don’t put any anti-dumping on semi products so that is a, not today or tomorrow, but that is a long-term strategy I would suggest for the big players in the market."

The two-day "ISMC 2019" was concluded on Jan. 30. It gathered hundreds of people, including steel and mining industry veterans and government officials.

The annual event, a brainchild of Donya-e-Eqtesad Media Group, the parent company of the Financial Tribune, is organized to discuss challenges and opportunities facing Iran's steel industry. This year, perhaps, the challenging part that grabbed more attention was the new round of US sanctions imposed against the Islamic Republic with the aim of restricting Iran's trade with the world.

Cheap Exports to India Under Sanctions

Amid rising concerns over cheap steel imports from China and countries that have signed a free trade agreement, some traders in India are worried about heavily discounted steel imports from Iran, which is facing US economic sanctions, the Hindu Business Line reported on Thursday.

The first consignment is expected in two tranches of 32,000 tons and 50,000 tons from Bandar Imam Khomeini Port and would be discharged at Nhava Sheva and Kandla ports in the next few days, sources said.

In order to circumvent import restrictions due to sanctions, the paperwork is being routed through Dubai and the line of credit is opened in euro or UAE dirham.

Iranian mills are pricing steel lower than Chinese mills and offering a discount of about $85 a ton compared to global benchmarks, as their domestic demand is weak and they are not able to export legally due to US sanctions.

Though India is exempted from importing oil from Iran under US sanctions, it cannot trade in any other commodities.

Explaining the modus operandi, sources said a trader with an office in Dubai procures steel products from Iranian mills and acquires a bill with a loading port such as Jebel Ali. The certificate of origin for the material is shown as Dubai, even though there are no steel mills there. The Indian customs does not check such details. Once the material lands in India, payment is credited in euros in a European bank.

Cheap steel imports from Iran are expected to put pressure on Indian steel companies that have already been bogged down by rising imports from FTA countries such as South Korea and Japan, besides China, sources said.

Iran has a steel production capacity of 34 million tons per year. It has set a target of achieving an annual production capacity of 55 million tons and export about 25 million tons a year by 2025.