Power Outages Inflict Weekly Losses Worth $235 Million on Steelmakers

EghtesadOnline: Deputy Industries Minister Saeed Zarandi said losses inflicted by power outages on steel mills affiliated to the Iranian Mines and Mining Industries Development and Renovation Organization have been estimated to reach $235 million per week.

News ID: ۷۸۶۹۷۹

08 September 2021

Summer demand has led to severe power and water shortage in the past few months in most regions, resulting in blackouts and dry taps.

Electricity consumption on June 20 surpassed 62,000 MW, which record followed high temperatures that drove public electricity consumption to new heights nationwide, Mehr News Agency reported.

As the manufacturing of steel and cement is an energy-intensive process, the factories involved were restricted by Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) and have been only allowed to work at limited capacities during specific hours.

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

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

Steel Target in Vision Plan

Iran is pursuing the target of becoming the world’s sixth largest steel producer as per the 20-Year Vision Plan, which targets annual production capacity expansion to 55 million tons and 20-25 million tons of exports per year by 2025.

“To achieve the goal of having an annual steel production capacity of 55 million tons, we have a shortage of at least 5,000 megawatts of electricity,” Zarandi said.

Noting that production conditions were satisfactory until the third month of the current fiscal year (June 22-July 22) before facing the challenges of electricity supply and power outages, the deputy minister said, “In the past three months due to lack of electricity supply, production units, especially in the cement and steel sector, faced problems.”

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.

Monthly Output

Iranian steelmakers produced 1.5 million tons of semi-finished steel during June 22-July 22, down 39.21% and 38.43% month-on-month and year-on-year respectively.

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

Slab output reached 604,000 tons to register a 33.33% decline YOY 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 YOY and a 51.21% decline MOM.

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.

Production of flat steel registered a 35.24% decline YOY and 23.11% MOM with 509,000 tons.

Hot-rolled coil made up 506,000 tons of the production in this category, indicating a decline of 33.15% YOY and 21.91% MOM, followed by cold-rolled coil with 176,000 tons, down 19.63% MOM and 29.31% YOY; and coated coil with 95,000, registering a fall of 35.81% and 28.57% 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 42.31% MOM.

Tavanir Spokesperson Mostafa Rajabi Mashhadi says all power restrictions on industries will be removed by Sept. 23.

Appreciating the cooperation of steel industry this summer, he announced the end of electricity restrictions on the industry by the date.

“This summer, a series of challenges such as unprecedented drought made it difficult to provide sustainable electricity to all subscribers, so given the priority of electricity supply to households and the public sectors, we were forced to impose restrictions on the industrial sector,” he was quoted as saying by ISNA.

Noting that such restrictions are applied worldwide during peak consumption hours, Rajabi said, “There was no restriction on industrial consumption from 12:00 a.m.-10:00 a.m. in our country.”