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Steel’s Bright Future
The Steel
industry continues to enjoy a favorable position in relation to
Iran’s other industries, which it has used to pursue its national
and international aspirations. Boosting productivity and exports, attracting
foreign investments and technologies, cooperation and partnership with foreign
parties were the main topics addressed by Abdollah Ezazi, Planning Deputy of
the National Iranian Steel Company (NISCO) in an interview with the press. The
full text of the interview follows:
What efforts have been made to
privatize the steel industry?
The government of the Islamic Republic of
Iran is committed to industrial privatization. Privatization can be addressed
as what we have done, are doing and are going to do. NISCO has been pursing
privatization by selling away its production companies, with – I must admit –
limited success, as these companies are enormous and exorbitantly expensive.
Alternatively, we have decided to maintain ownership of the companies and
delegate their running to the private sector. We have already delegated the
daily maintenance and repairs of Mobarakeh Steel Co., Esfahan Steel Co. and
Khouzestan Steel Co. to contractors from the private sector. In some
subsidiary companies we have even delegated the production to contractors, who
are paid upon product delivery.
NISCO has realized that the private sector
is eager to invest in the concluding phases of steel production, and seeks to
be the link between producers and consumers. We have welcomed this trend and
have pulled our investments out of the light slab sector, leaving it
completely to the private sector, free from our competition. However, we are
still active in the heavy slab sector, as the private sector is not yet
capable of its independent operation. Light slabs are made from steel ingots,
of which we have a domestic shortage. Thus, we annually import a significant
amount of blooms and billets as the raw material for ingots. NISCO plans on
investing in the domestic bloom and billet sector, in an attempt to achieve
self-sufficiency.
When are NISCO’s subsidiaries
entering the stock market?
Our privatization policy, particularly in
stock market entry, seeks to be reasonable and practical. Some of our
subsidiary companies have been present in the stock market for years, and we
are preparing several more for entry in the near future. If any of our
subsidiaries are prepared for the stock market we are happy to facilitate
their entry.
Experts in the steel industry
claim NISCO provide many job opportunities, is this true?
Statistics show that every position in NISCO
creates 14 indirect jobs in upstream and downstream and related sectors. This
substantial number becomes plausible when the long line of steel production is
considered. Many people are involved from when iron ore is mined until it is
consumed, as steel. The produced steel is not always used as a finished
product – as in construction – but is often a raw material for other
industries. The output from steel production is measured in million tons. The
mere transportation of this volume creates jobs. This is why many states,
including ours, categorize steel as a leading industry. It is an industry that
not only produces and employs, but also compels many related industries to
produce and employ.
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"In
the fourth development plan draft we have set our target capacity at 19
million tons per year, but this has not yet been finalized." |
What are the NISCO’s future
plans for
Iran’s steel industry?
NISCO must meet the domestic market demand
for steel. An influential factor in market demand is national population, thus
NISCO undertakes annual research into population growth. We have ascertained
that, due to industrialization, steel consumption – and price – has an annual
increase of about 4%. With 30% of our production allocated to export, we must
consistently boost production to meet our targets. In the third development
plan started in 1999, our target annual steel production capacity was 14.7
million tons, but we are lagging a bit behind that. This is because of the
worldwide decline in steel prices in the past couple of years. The steel that
was easily sold at $260 per ton, was struggling to go at $130 last year.
Obviously this colossal drop in prices has deprived us of the resources we
require for achieving our target capacity. However, we still consider
ourselves bound to the target and are committed to achieving it, even if it is
delayed. In the fourth development plan draft we have set our target capacity
at 19 million tons per year, but this has not yet been finalized.
How does
Iran rank against other steel producers in the
world?
Iran, producing 7.5 million tons of steel per year, ranks
twenty-first in the world. Quality-wise our product meets all international
standards and easily competes with even industrialized countries. But price
competition is not as straight forward. Steel is produced in many countries,
some in the first world and some in the third world. The price of
industrialized countries’ steel is relatively high, with the prices of US,
Japan and
Europe being the highest. The next price tier consists of
South America, the
Middle East – including
Iran – and
China. There is also a third price tier, which sells for less than
the second, consisting of
Russia,
Ukraine and
Kazakhstan. These countries produce low quality steel and do not factor
all of their expenditure into their price, thus undervaluing steel and putting
pressure on the world market price.
However, since we have been anticipating
Iran’s eventual membership in the World Trade Organization (WTO)
and the free and borderless trade it ensues, we have tried to keep NISCO
competitive globally – by being production and cost efficient. The very fact
that we pulled through this steel market crisis, is a testimony to our success
in implementing this policy. Today we easily compete with the first and second
tiers and have a profitable industry.
Can you give us an overview of
NISCO’s exports and its overseas markets?
In export three factors are determinant:
quality, price, reliability. Fortunately, we have met these requirements and
our export has had a consistent growth over the past ten years. Steel
transportation is relatively expensive compared to the price of steel itself,
thus our initial focus has been on regional markets. We’ve exported, and in
some cases continue to export, to over 20 countries, but our main markets are
in South and Southeast Asian countries because of their shipping proximately
and steel demand.
We started our exports with
China and have since added
Thailand,
Indonesia and
India to our list of costumers. Through the
Persian Gulf we have had some on and off export to
Saudi Arabia,
Kuwait,
Qatar and UAE. We even have limit but ongoing export to
Europe and Far East Asia, with
Germany,
Italy,
Spain,
Japan and
Korea buying our steel sheets.
Does NISCO have other exports;
say in the form of technical support or machinery?
One of NISCO’s general policies has been
domesticating imported technologies as soon as possible. We can now design and
manufacture most of the machinery and equipment we use. And this is not
necessarily exclusive to NISCO, as many in the private sector – with NISCO
guidance and encouragement – have taken steps in this direction. This means
that we will be less dependent on imports in our new companies. Even though we
are still far from self-sufficient, we now merely need to import technology
and can construct domestically.
Fortunately this policy has been effective
and we are now ourselves exporting technology. The first example of this is
the involvement of the Iranian Ascotech Company in
Kuwait’s steel industry. Ascotech holds 49% of a Kuwaiti company’s
shares and supplies most of the machinery and maintenance services, while
Khouzestan Steel Co. supplies it with slabs and other raw materials.
Our aforementioned capabilities in all
aspects of steel production were noticed by the Syrian Prime Minister in one
of his visits to
Iran. It has since been decided that
Iran construct a steel company in
Syria. This venture has been sponsored by NISCO. There are also
ongoing negotiations with
Oman and
Bosnia, who are eager to cooperate with
Iran in exploiting their steel.
How much foreign investment
has NISCO had?
We have not had any direct foreign
investments in the steel industry as such. Foreign investors have started from
the oil and petrochemical industries and if they are profitable, steel is next
in line. But foreign investors, particularly Italian and to lesser extent
French, German and Austrian, have been financing many of our projects through
their banks and loan institutions.
There is a lot of talk of
Iran’s comparative advantages, what exactly does
this mean?
Comparative advantages are factors that make
Iran an advantageous location for steel production. Economists
divide these advantages into circumstantial and achieved.
Iran currently benefits from a wealth of circumstantial
advantages. For example, the steel industry is incredibly energy consuming and
Iran has ready access to inexpensive energy. We have 3.5 billion
tons of iron ore reserves and enough of the other required minerals to run our
steel industry. And we have a plentiful supply of skilled and educated
workers. Our circumstantial advantages have given us a strong position, but
with the current market crisis, it is not strong enough. One billion tons of
steel is produced annually, at a time when worldwide demand adds up to only
800 million tons. This extra 200 million tons has pressed the market into an
intense competition, with prices prone to collapse on any given day. Our
survival may be contingent on improving our achieved advantages – by
constantly updating our workforce and practices along with new technologies,
making our production more cost-efficient, conserving energy and saving on
transport. Achieved advantages are contingent on investing in new technologies
and staying updated.
In a conference held some
three years ago, the then Minster of Mines and Metals, Esshaq Jahanigiri was
looking forward to the day that mines replace oil in our country. What’s your
take on the matter?
Nowadays, NISCO has been relieved of its
main subsidiary mines, so it is really not my call to make. The mines have
been granted independence so they can better conduct their activities unbound
by the overshadowing steel industry. I’m in no position to comment, but I am
sure the mines will continue their growth and expansion in harmony with the
steel industry. In
Iran, the steel industry has traditionally been ahead of mines,
and the logic behind this is that steel production needs many minerals to
operate, and mines serve to fulfill this need. So mines must conform with the
needs of industry, and I am sure they will do so.
Do you have any concluding
remarks?
I just want to emphasize investment in the
private sector. Whenever I speak to government officials, I see their
unwavering support and commitment to this matter. They have – and continue to
remove – any obstacle before those able and willing to invest. A link of the
production chain has already been transferred to the private sector and the
rest of the links are ready to go. I guarantee the full support and
cooperation of government and NISCO officials and strongly encourage anyone
able to invest to come forward. |
