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May 2017, No. 83



MME Enjoys Special Status in Europe 

Morteza Aghajani, MME CEO

Morteza Aghajani, MME CEO and Hassan Karbaschi, Director of Iran branch of MME participated in a joint interview with Iran International and elaborated on the activities of the company in recent years as well as the performance of IMIDRO under the government of President Hassan Rouhani. They also talked about the role the Joint Comprehensive Plan of Action (JCPOA) could play in facilitating foreign investment. 

Introducing MME Company

The MME Company is the only engineering company in the field of mine and mining industries which was registered in Europe (Germany) some 20 years ago. Considering the contacts established with different manufacturers and specialists since the founding of the company, it now enjoys a special status in Europe. Also with regard to the implemented and ongoing projects in Iran and operating under the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), it has acquired an excellent status in the mining and steel industry. These are available facilities and privileges that if used properly, this company can act as a bridge and transfer technical knowhow and attract foreign investors and partners, especially from Europe, towards Iran’s infrastructures. 

Ongoing Projects: Progress Status and Time of Launching

MME Company is present in five provincial steel projects as the contractor in the engineering and supply section. Current projects of the company in the field of direct reduction include Shadegan Steel, Miyaneh Steel, Baft Steel, and Neyriz Steel all of which are implemented under the exclusive innovative method of the company known as PERED (Persian Direct Reduction).

In the Shadegan Steel project, installation has been completed and parts of the equipment have become operational and we hope that launching of the remaining equipment will be accomplished by the year-end. From the beginning of the next year; we will be witness to the production of Shadegan Steel. Meanwhile, Miyaneh Steel project is at the stage of completion of the installation and with the deployment of the MME supervision team, operation of the equipment has started recently and is at the stage of cold testing. This project too will become operational in the early months of the next calendar year (starting March 21, 2017). In addition, it is predicted that the Neyriz project which has had satisfactory progress from the beginning of the year will become operational in the spring next year shortly after Miyaneh Steel.

With regard to the uniformity of the technology for the MME reduction projects in provincial projects, after operation of Shadegan Steel project and the experience gained, cold and warm testing will certainly be done in other projects more easily and more speedily. Furthermore, with the operation of provincial direct reduction units in PERED method, a good reference will be set for this technology as a result of which new markets will be developed for the MME Company both inside and outside the country.

Our other project is Sefid Dasht Steel the reduction part of which has been opened and in its steel manufacturing part, the MME Company is present as the designer and financier of the equipment. At present and with the financing of Mubarakeh Steel Complex part of the equipment has been shipped to Bandar Abbas.

Meanwhile, ordering and completion of the remaining equipment of the project has been activated and we hope that with the support of Mubarakeh Steel Complex supply, installation and operation of the project will be completed within 18 months. 

Measures Taken in Recent Years & Priorities of MME

Our first priority is accomplishment of the obligations related to the current and ongoing projects such as provincial plans and given that for the first time the PERED technology will be applied in these projects sound planning for the realization of such an important task enjoys special importance.

Parallel to the implementation of the current projects, paying attention to the market development with the priority of presence in all stages of steel production chain ranging from the concentrated lines and pellet to casting and production of specific steel products are on the agenda.

In the next step, entrance into other mineral industries such as aluminum, copper, lead, zinc, etc. is considered for which measures have been taken and we are decisive to play a role as an engineering company in these industries through consultations and use of the potential of other partners and qualified companies in the form of joint venture.

Also with regard to the needs of the steel companies of the country to optimization of production lines and reduction of especially water, electricity and gas consumption, the MME Company  has compiled a corrective proposal in the above-mentioned fields and signed memorandums of understanding with eligible companies for the implementation of the related projects, including Foolade Paya, Tadbir Sanaat, Absan Palayesh, Irisa, etc. in order to take measures for the related marketing within the framework of a consortium.

Our other target is elucidation and presentation of capabilities and potential of the MME Company to organizations and companies active in the field of mining and mineral industries. As was previously mentioned, the experiences gained in the past and present projects, presence in the heart of Europe and recognition of the suppliers, access to the European professionals in various fields and ... have provided unique conditions for the company, which belongs to this country and should be put at the disposal of companies and mineral and industrial complexes.

In this regard from many years ago agreements have been signed for offering technical and engineering services with major steel companies such as Mubarakeh Steel, Khuzestan Steel, Oxin Steel, etc. for the dispatch of foreign specialists and implementation of executive and supervision activities. At present too through consultations conducted we are signing the same type of agreements with the provincial steel companies as well as Iran National Steel Company and IMIDRO in proportion with the needs of each complex.

In addition, reform of the manpower structure has been completed on the basis of contractual obligations, including the use and stationing of operational, educational, etc. teams in the sites of provincial projects, strengthening of Iran engineering team for conducting technical and economic studies in different fields of mining and mineral industries, completion of engineering of Sepid Dasht project and new fields of activities of MME Company. 

In your opinion, what role the Joint Comprehensive Plan of Action (JCPOA) has played and will play in attraction of foreign investment and in realizing the targets of steel Vision Plan?

Hassan Karbaschi,
Director of Iran branch of MME

With regard to the openings made in the aftermath of JCPOA (Iran nuclear deal) and the new atmosphere governing over Iran’s economic relations with the world community, conditions will be different from the past for the attraction of foreign investment. Therefore, through proper mainstreaming, creating political and economic stability and eliminating the existing barriers, we can act effectively in the area of steel. Consequently, it can be hoped that we will get closer to the targets of the steel Vision Plan. Of course, we should also pay attention that even in case of attracting the required capital for producing 55 million tons, planning for the supply of the raw materials required for the production of this amount of steel and the relevant infrastructures, including railroad transportation, water resources, gas and electricity, etc. should be made so that the balance of steel production and supply, in an integrated form, would be accurately and seriously considered in the development of the forthcoming years.

In the aftermath of the JCPOA relations have become easier to some extent but the obstacles for attracting foreign investment, despite the efforts made were not completely eliminated which, of course, is natural and requires passage of time. The main obstacle is in the field of finance which if removed many of the problems would be solved.

Of course, after the new administration came to power in the United States and the new positions taken about JCPOA, new developments have taken place and the prospect for resolution of the problems through full implementation of the JCPOA has been slowed down a little. But, we are totally optimistic because in Europe, due to different reasons, there is a positive outlook towards Iran. At the same time, in the field of marketing we have widespread activities both inside and outside Iran. Studies of the bauxite project in Guinea, steel project in Pakistan and PERED project in China are near completion. 

How would you assess IMIDRO performance in the field of steel under the 11th government?

Being aware of the financial problems caused by the drop in the 11th government’s revenues, IMIDRO decided to delegate the projects which had been almost halted or had very slow progress to the private sector. Fortunately this decision was welcomed by domestic investors which caused the projects come out of the recession. Of course, the experience of calling on the private sector showed that participation of steel companies in provincial steel projects would be warmly welcomed. Because, large companies such as Mubarakeh Steel Complex and Khuzestan Steel even under economic recession and lowering of the price of basic metals, still have the potential to finance such projects. On the other hand, given that these companies are sponge iron consumers, they were interested in supplying their sponge iron requirements from the provincial sponge iron production capacity instead of purchasing the product from other suppliers thus reducing parts of their costs.


Karbaschi said: Experience of calling on the private sector showed that participation of steel companies in provincial steel projects would be warmly welcomed.


In addition, given the experience and full dominance that major steel producers have in the operation and management of these types of units, definitely operation of these projects will be faced with less obstacles and problems and will be implemented under better conditions. At present, Mubarakeh Steel Complex holds over 65% of the shares of Sepid Dasht Steel project which is the first provincial project to become operational. Also, 65% of the shares of Shadegan project have been purchased by Khuzestan Steel Complex and we hope this project will soon become operational with PERED technology as the first provincial project. The decision taken for financing through participation of the private sector in completion of the projects by the senior management of IMIDRO broke the lock of the provincial projects. 

Generally speaking what problems the contracting companies are faced with?

The extended period of the projects is one of the problems that have caused different elements such as the major and minor contractors to sustain fixed costs, the costs of engineering services and other current costs for a longer period of time. On the other hand, the prices that have been specified at the time of concluding the contract are widely different from the real costs of supply and implementation and due to the inflation created in that period of time the prices of most equipment and raw materials have gone up.

Although the employers consider coefficients and adjustments to compensate for this situation, in many cases, these coefficients are not commensurate with the inflation and rising prices that have emerged in this long period. In addition, in some cases lack of operation of the initial LC has caused that a major amount of the money which was expected to be paid in foreign currency to the contractors for the implementation of different projects, has been paid in local currency.

In addition, given that due to some governmental limitations such demands have not been paid to the companies on the basis of free market rates (payments have been made on the basis of subsidized exchange rates lower than the open market rates), the financial potential of the contractor companies has been weakened. The contractors, for the supply of foreign equipment, would sign contracts with foreign manufacturers and contract obligations should be precisely implemented.

Naturally what has occurred within our country regarding the demands and agreements reached between domestic contractor companies and the employers will cause no change in contract obligations and payments of the contractors with foreign partners. Furthermore, some of the equipment prepared for these projects will gradually become worn out or sometimes their guarantees are expired. For example parts of the rotating equipment such as compressors demand review and possibly repair. Presence of representatives of foreign manufacturers for the inspection of equipment and if needed for changing the relevant parts, as well as the guarantees that need to be issued for these parts will impose costs on the employers and contractors. Collection of these costs will severely affect the financial potential and the margin of profit of the contractors. 

What are the problems facing implementation of the projects in EPCF?

Problems related to this filed are almost the same as those in all contracting companies. Due to the existence of such problems in the past years we have witnessed fewer EPCF projects. Due to the same reason the companies have made efforts to implement smaller-scale projects with their limited financial resources. But for the large projects or continuation of the projects under implementation, such problems still exist. Among the problems that exist on the way of using foreign finance is that generally supply of foreign finance is in need of some pre-conditions. One of these pre-conditions is supply of 40 to 50 percent of the factory equipment through foreign investor countries. Now that realization of this effort is subject to the existence of the required technology in that field, another obstacle is the required guarantee expected by the investor for providing the financing.

MINES & METALS ENGINEERING GmbH 

www.mme-co.de

Headquarters Germany

Tersteegenstraße. 10

40474 Düsseldorf.

+49 (0) 211 6999051-0

+49 (0) 211 6999051-99

info@mme-co.de

 

Branch Office Iran

Fourth Alley, South Pirouzan St,

Hormozan St, Shahrak Gharb, Tehran.

+98 (0) 21 88577870

+98 (0) 21 88575758

info@mme-co.ir


 

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  May 2017
No. 83