‘ISMC 2021’ Calls for Shift in Steel Pricing Policy in Iran

EghtesadOnline: Policymakers and experts discussed a wide range of issues about Iran's steel market and its future during the inaugural ceremony of the 11th Iranian Steel and Iron Ore Market Conference and Expo, organized by Donya-e-Eqtesad Media Group, the parent company of Financial Tribune.

News ID: ۷۸۶۰۸۸

23 February 2021

ISMC 2021, underway in Tehran on Feb. 22-24, aims to address key challenges of the Iranian steel industry, including those faced by exporters; domestic policies; pricing steel products in the local market; technological developments; and digital transformation, among others.

A majority of speakers at the Monday event emphasized the need for a shift in the government's price control policies, boosting production capacity to meet local demand and promoting the export of steel products with higher value added.

Alireza Bakhtiari, CEO and owner of Donya-e-Eqtesad Media Group, opened the conference by elaborating on the main goals of the annual event.

"Iran has been dealing with increased external pressure in recent years … External risks are being reduced. However, business activities might face another risk in the upcoming years, one that is imposed by policymakers," he said.

Bakhtiari said policies aimed at supporting consumers by controlling prices have gained no success.

He noted that by insisting on setting price caps, policymakers have lowered Iranian steel industry's competitiveness in international markets, making the sector less appealing to investors.

The government’s plan to intervene in the market and control steel prices has been hotly debated by steel manufacturers, capital market authorities and government officials.

Criticism mounted in recent weeks against a controversial decision last month by the Industries Ministry to set a price ceiling for steel products listed in the Iran Mercantile Exchange.

Industries Minister Alireza Razm-Hosseini announced a measure that calls for “steel products to be sold at IME at prices equivalent to 70% in the Commonwealth of Independent States markets.”

Criticisms and Proposals

Ardeshir Sa'd-Mohammadi, deputy industries minister for mining affairs, was the next speaker.

"We need to make it clear whether we are planning to adopt an open economy. If we prefer a combination of all approaches, we should expect no improvement in the current conditions," he added.

"At present, we are using a floating pricing mechanism … In the past the ministry adopted price control policies … However, we have no option but to adopt open market mechanism, in which prices are set based on the market demand and supply."

The ISMC 2021 participants also discussed challenges facing the exporters of steel products during a specialized panel held after the conference.

Ehsan Dashtianeh, a board member of Esfahan Steel Company, criticized policymakers for their pricing policy and improper distribution of subsidies, as "these measures have resulted in underpricing of exported goods and wastage of national resources".

Nasser Taqizadeh, CEO of Chadormalu Mining and Industrial Company, also said the government needs to incorporate international norms in pricing domestic steel market, which is allowing the market to set prices based on supply and demand.

"It is necessary for us to start trading based on rates in global markets … We need to lift restrictions on the import of iron ore and concentrates before we can manage to expand the country's output," he added.

The aggregate annual capacity of 84 Iranian steel companies has reached 39.82 million tons, according to new data released by the Iranian Mines and Mining Industries Organization.

Mobarakeh Steel Company, Iran’s biggest steelmaker, accounts for 18% of total production capacity with 7.2 million tons per year.

Khuzestan Steel Company comes next with 3.8 million tons followed by Esfahan Steel Company with 3.6 million tons and South Kaveh Steel Company with 2.4 million tons.

As per the goals set in the 20-Year National Vision Plan (2005-25), Iran seeks to become the world’s sixth largest steelmaker by 2025 with a crude steel output capacity of 55 million tons.

According to Iranian Mines and Mining Industries Development and Renovation Organization, Iran’s steel production capacity is expected to reach 43.6 million tons by the end of the current Iranian year (March 20, 2021), while actual production is estimated to hit 31.1 million tons to utilize 71% of the nominal capacity.

IMIDRO is a state-run enterprise and Iran's biggest holding company active in the mining sector.

7.5m Tons of Finished Steel, Semis Exported in 10 Months

More than 7.5 million tons of finished and semi-finished steel products were exported from Iran during the first 10 months of the current fiscal year (March 20-Jan. 19), the Iranian Steel Producers Association’s latest report says.

Semi-finished steel made up 5.13 million tons of the total export volume, down 12% year over year.

Billet and bloom had the lion’s share of semis exports with an aggregate of 3.92 million tons, which is 4% less than the corresponding period of last year’s 4.09 million tons. Slab came next with 1.2 million tons, down 30% YOY.

Iranian steelmakers exported 1.72 million tons of slab during the same period of last year.

Exports of finished steel products declined by 20% to 2.373 million tons.

Rebar accounted for the largest portion of finished steel products exported from Iran during the 10-month period under review, with 1.48 million tons. The volume of Iran’s rebar exports experienced a 22% YOY fall.

Hot-rolled coil came next with 476,000 tons, registering a 2% YOY growth.

Beams exports stood at 151,000 tons, down 4% YOY. Nearly 159,000 tons of "L-beam, T-beam and other types" were exported from Iran during the 10-month period, recording an 18% decline YOY.

Coated coil with 73,000 tons, down 46% YOY; and cold-rolled coil with 26,000 tons, down 76% YOY, were other finished steel products exported from Iran.

Exports of direct-reduced iron dropped by 25% YOY to 666,000 tons.

Unlike exports, imports of finished and semi-finished steel products marked an increase during the period under review compared with last year’s corresponding period.

The ISPA report shows that steel imports stood at 805,000 tons, up 102% YOY.

Semis imports, which only consisted of billet and bloom, made up 5,000 tons of the total figure, up 67% compared with the same period of last year. Billet and bloom imports amounted to 4,000 tons, up 100%. Import of slab remained unchanged at 1,000 tons.

Imports of finished steel jumped by 102% YOY to 800,000 tons. The imports mostly included HRC with 308,000 tons, up 360%; CRC with 226,000 tons, up 93%; coated coil with 192,000, up 18%; L-beam, T-beam and other types with 41,000 tons, up 273%; rebar with 24,000 tons, down 17%; and beams with 9,000 tons, unchanged compared with the same period of last year's figures.

Iranian steelmakers produced a total of 43.716 million tons of semi-finished and finished steel products during the 10 months to Jan. 19.

Iran's output of direct reduced iron grew by 8% to 25.55 million tons.