IPI Growth at One-Year Low

EghtesadOnline: Iran’s Industrial Production Index grew by 2.5% in the fourth month of the current fiscal year (June 22-July 22) compared with the same period of last year, which is the lowest growth rate in the past 12 months.

News ID: ۷۸۶۸۷۶

24 August 2021

According to a report by Tehran Chamber of Commerce, Industries, Mines and Agriculture citing the Monetary and Banking Research Institute of the Central Bank of Iran, the index had increased by 7.7% in the preceding month (ended June 21).

The automotive industry was the major contributor to industrial production during the month under review.

In fact, the automotive industry’s IPI jumped 20.1% in the month ending July 22 to become the only contributor to the positive growth of the index during the month.

The negative growth rate registered by base metal and non-metal mineral industries due to restrictions imposed on electricity supply for steel and cement industries (subsectors of the two industries) during the month ending July 22 were to blame for the decline in IPI.

The TCCIM report also shows the unprecedented negative growth of -2.3% registered by export companies contributed to the decline in IPI. Given the increase in warehouse inventory of these companies, IPI is expected to slow even further in the coming months.

IPI is measured based on data taken from more than 250 industrial companies listed at Tehran Stock Exchange; they represent more than half of Iran’s total industrial production.

Following the reimposition of US sanctions, the Industrial Production Index turned negative in the Iranian year ended March 2019; this negative growth continued into the third quarter of the following year, i.e., Sept. 23-Dec. 21, 2019. The positive grow posted in Q4 of the year ended March 2020 (Dec. 22, 2019-March 19, 2020) continued until March 2021 to reach 5.4%. Positive growth in IPI has been posted in the current year: 6.8% in the month ending May 21 and 7.7% in the month ending June 21. However, the index relative to a base year, which the CBI considers to be fiscal 2016-17, stood at 104 in the month ending July 22, indicating a 2.5% increase compared with the same period of last year. IPI registered for the month ending July 22 nearly equals to that of the month ending July 22, 2018, but is 2.7% lower than IPI posted in the year ending March 2018 (which was 110).

IPI registered by petrochemicals and automotive industries in the month ending July 22 were respectively 2.6% and 15.3% lower than IPI posted in the month ending July 22, 2018. Statistics by TSE-listed companies show that the IPI growth of base metal and non-metal mineral industries decreased from 3.5% and 5.4% in the month ending June 21 to 2.6% and 2.7% in the month ending July 22.

Steel, Cement Industries Hit by Power Cuts

Summer demand has led to severe power and water shortages in the past weeks in most regions, which resulted in blackouts and dry taps.

Steel and cement factories were subsequently restricted by the Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) and were only allowed to work at 50% of their capacity from 12-8 a.m. during the period.

The abrupt ban on the two key sectors created shortages of steel and cement in local markets and rise in prices, creating new problems for most construction sectors.

Due to extreme heat and the public’s failure to lower consumption, there were problems with electricity supply to the steel industry in the past few days, he said recently.

Rasoul Khalifeh-Soltani, the head of Iranian Steel Producers Association, said at the heat of the blackouts that the power outages shut down 85% of the steel industry’s production.

Heavyweight Iranian mining firms saw 100 trillion rials ($365 million) in lost sales during the first four months of the current fiscal year (March 21-July 22), a new report released by the Iranian Mines and Mining Industries Development and Renovation Organization shows.

According to the Iranian Steel Producers Association’s latest report, Iran’s steel output in the fourth month of the current fiscal year (June 22-July 22) registered a noticeable fall compared with the previous month and the same period of last year.

Iranian steelmakers produced 1.5 million tons of semi-finished steel in the fourth month of the current fiscal year (June 22-July 22), down 39.21% and 38.43% MOM and YOY respectively.

Billet and bloom made up 897,000 tons of semi-finished production, down 41.45% and 41.87% YOY and month-on-month respectively.

Slab output reached 604,000 tons to register a 33.33% decline year-on-year and a 34.77% decline MOM.

The output of finished steel decreased by 41.05% YOY to 1.07 million tons, which is down 40.99% compared with the month before.

Long steel products’ share in the output of finished steel products stood at 565,000 tons, posting a 45.46% decline compared with similar period of last year and a 51.21% decline month-on-month.

Rebar production hit 458,000, down 46.24% YOY and down 94.72% MOM. It was followed by beams with 56,000 tons (down 51.72% YOY, down 50.44% MOM) and L-beam, T-beam and other types with 51,000 tons, down 25% and 35.44% YOY and MOM respectively.

The production of flat steel registered a 35.24% decline year-on-year and 23.11% month-on-month with 509,000 tons.

Hot-rolled coil made up 506,000 tons of the production in this category, indicating a 33.15% decline YOY and 21.91% MOM, followed by cold-rolled coil with 176,000 tons, down 19.63% MOM and down 29.31% YOY and coated coil with 95,000 registered a 35.81% and 28.57% fall YOY and MOM respectively.

According to the ISPA data, Iran's output of direct reduced iron stood at 1.83 million tons, down 25.36% YOY and down 42.31% MOM.

Industrial PMI Slides for 2nd Consecutive Month

The Purchasing Managers’ Index for industries during the fourth month of the current fiscal year (June 22-July 22) settled at 43.19 from 54.21 of the preceding month (May 22-June 21), indicating a 11.02-point or a 20.32% decline.

The announcement was made by the Statistics and Economic Analysis Center of Iran Chamber of Commerce, Industries, Mines and Agriculture. The center is measuring PMI, known by its Farsi acronym Shamekh, in Iran for the past 34 months.

PMI is an indicator of economic health for manufacturing and services sectors. It provides information about current business conditions to companies’ decision-makers, analysts and purchasing managers.

The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction and a reading at 50 indicates no change. The further away from 50, the greater the level of change.

PMI is based on a monthly survey sent to senior executives of more than 400 companies. It is based on five major survey areas: “new orders” (30%), “raw material inventory” (10%), “production” (25%), “supplier deliveries” (15%) and “employment” (20%).

The survey poses 12 questions about business conditions and any changes, whether it is improving, no changes or deteriorating.

“Machinery and home appliances” posted the highest PMI with a reading of 57.6 during last month while “wood, paper and furniture” industries registered the lowest PMI reading with 25.3.