Power Curbs, Command Pricing Lead to Steel Output Decline

EghtesadOnline: Domestic steel production during the current fiscal year’s first 11 months (March 21, 2021-Feb. 19) decline compared with the corresponding period of the preceding year’s first 11 months.

News ID: ۷۸۷۷۶۳

14 March 2022

Iranian steelmakers produced a total of 25.34 million tons of semi-finished products during the period, down 9% year-on-year, Iran Steel Producers Association reported.

According to ISPA, billet and bloom made up 15.13 million tons of total semi-finished production, down 13% YOY.

Slab output stood at 10.21 million tons to register a 2% year-on-year decline.

The output of finished steel decreased by 5% YOY to 18.03 million tons.

Long steel products had a 10.31-million-ton share in the output of finished steel products, posting a 3% decline compared with the similar period of last year.

Rebar production stood at 8.43 million tons (down 4% YOY) and was followed by beams with 1.13 tons (down 3% YOY) and L-beam, T-beam and other types with 752,000 tons (down 1% YOY).

Production of flat steel with 7.72 million tons registered a 7% YOY decline.

Hot-rolled coil comprised 7.59 million tons in this category, showing a 5% YOY decline, followed by cold-rolled coil with 2.36 million tons, down 1% YOY, and coated coil with 1.39 down 3% compared with last year’s corresponding period.

The output of direct reduced iron stood at 27.48 million tons during the period under review, down 1% YOY.

110 Steel Mills Suspend Production After Command Pricing

Over the past month, 110 steel mills have suspended production after the Ministry of Industries, Mining and Trade dictated them to lower the prices of their products, Reza Shahrestani, a member of ISPA’s board of directors, said recently.

Noting that the closures are temporary, he said the ordered reduction in prices of steel products comes as prices of upstream industry products considered as feed for steel mills have been on the rise, ILNA reported.

“The 110 units that have suspended production are all smelting plants. Rolling mills are in a worse condition, as they are forced to produce at a loss because of their outstanding debts to banks,” he added.

Denouncing the policies of the Industries Ministry, the official said steelmakers have been forced to first sell their products in the domestic market through the Iran Mercantile Exchange platform before they can export what remains.

Shahrestani said the supply side is by far more than demand in the domestic market, such that annual steel ingot production is at 19 million tons whereas domestic consumption is only 12 million tons.

Gas, Electricity Restrictions

The decline in steel output is also because of electricity and gas supply restrictions imposed on steelmakers in summer and winter.

The Oil Ministry and the National Iranian Gas Company put pressure on steelmakers and mining firms to drastically cut gas consumptions in winter, according to a report by the Persian daily Jahan-e-Sanat.

Specifically, Chadormalu Mining and Industrial Company was asked to keep its gas consumption to below 30,000 cubic meters per day until further notice. Since the quota is less than 1% of the heavyweight mining firm’s gas consumption under normal conditions, the restriction practically meant cessation of production in Chadormalu, inflicting huge losses in lost production.

The report also noted that certain companies were restricted for longer periods, while others were less affected.

It noted that producers of direct-reduced iron were the prime target of gas restrictions due to their energy-intensive nature, adding that since DRI is considered a strategic and key product in steel industry, the measure impacted the entire steel production chain and led to a massive decline in the output of steel products and rising prices.

With the decline in temperature across Iran, gas consumption in households set a record high in winter.

The National Iranian Gas Company announced on Feb. 27 that the restrictions have come to an end.

This is not the first time that industries, especially steelmakers, faced power restrictions. In the summer of the current fiscal year (July 23-Sept. 22), steel production declined by 40% compared with the previous quarter (March 21-June 22) due to electricity cuts amid record high domestic consumption.

In a letter to the Supreme National Security Council, ISPA put steel mills’ losses due to power outages at $6 billion from the beginning of the current Iranian year (March 21) to Sept. 12.

According to ISPA, 82 days of productions were lost during the period due to power outages and 300,000 direct and indirect jobs were lost or restricted, the news portal of the association reported.

Summer demand led to a severe power and water shortage in summer in most regions, resulting in blackouts and dry taps.

The record came as high temperatures nationwide drove general electricity consumption to new heights in summer, prompting authorities to prioritize domestic users over industries in supplying power.

As the manufacture of steel and related products is an energy-intensive process, steel in addition to cement factories were subsequently restricted by the Iran Power Generation, Distribution and Transmission Company (locally known as Tavanir) and have been only allowed to work at fraction of their demand within specific hours.

According to Tavanir Spokesman Mostafa Rajabi-Mashhadi, summer electricity restrictions for industries were removed as of Sept. 23.