Planning Big for Iranian Steel;
Targeting 55 mt of Steel Production Annually
Steel Demand Expected to Rise 6% to 21.255 mt in 2018
According to Iranian Mines and Mining Industries Development and Renovation
Organization (IMIDRO), Iranian crude steel production capacity grew 32% from
fiscal year March 2013-14 to 29.8 million tons (mt) in the last Iranian year
(ended March 20, 2017) and is expected to reach 31 mt by the end of the
current fiscal year.
Steel production rose 15% during the same four-year period from
16.1 mt to
forecasts production to remain more or less the same this year. A comparison
of steelmaking capacity and actual production brings into light the
industry’s capacity utilization ratio, a key indicator of the sector’s
In capacity utilization, the Iranian steel industry has mostly moved against
the global trend. The ratio’s only growth was recorded in the fiscal March
2014-15, as it grew from 72% the year before to 78%.
It has been on a downtrend ever since, dropping to 62% last year and is
forecast to shed another 2% this year. The global utilization ratio, on the
other hand, is recovering from its low of 65% in 2015 to 73% in 2016.
It is expected to stand at 72% for 2017, according to World Steel
Association. What this indicates is that Iran is creating more steelmaking
capacity than it can use, meaning higher operational costs and lower
This trend is likely to continue, considering that any growth in steel
demand in the recession-hit construction sector, the main driver of steel
consumption in Iran, seems unlikely to keep pace with steel expansion trend.
In its latest report titled “Short Range Outlook for 2017-18”, the World
Steel Association forecasts that
demand will increase by 4.9% to 20.04 mt in 2017 and increase to 6% in 2018
with 21.255 mt.
Demand growth would still be too low to boost production. Here, exports may
be the industry’s path to salvation, as
they are the only alternative to the slump-stricken local market. Iranian
mills exported over 3.74 mt of semis and 1.79 mt of
steel products in the last fiscal year, registering a 108% and 16% growth
respectively compared to the preceding year, the Iranian Steel Producers
Thailand, the UAE, and Taiwan were the main customers of Iranian steel,
accounting for 16%, 12% and 11% of 5.53 mt of total exports, according to
Italy with 9%, Oman with 7%, China with 7%, Iraq with 6%, Afghanistan with
5%, Jordan with 3%, Turkey with 3%, Egypt with 3%, Brazil with 3%, Spain
with 2%, Morocco with 2% and Turkmenistan with 2% followed.
Nonetheless, the government seems intent on pursuing its ambitious steel
capacity expansion plan to become the world’s sixth largest steelmaker, as
part of its 20-Year Vision Plan (2005-25). It entails an annual production
of 55 mt of crude steel and 20-25 mt of exports per year by the deadline.
Iron ore concentrate production capacity grew 54% during the same four-year
period under review to 44.35 mt in the last fiscal year.
Production grew only about 30% during the period to stand at 31.36 mt last
year. This brings capacity utilization ratio to 71% from the high of 84%
four years ago.
For pellets, output capacity grew 45% over the four years to reach 32 mt
was up 23% to 25.62 mt last year. Therefore, capacity
utilization ratio stood at 80% last year, while it hovered above 95% for the
three preceding years.
Planning Big: 55 mt Annual Production Target
By possessing 2.7 billion tons (bt) of proven iron ore reserves containing
1.5 bt of iron and estimated total reserves of 4.5 bt, Iran is standing in
the 10th rank of world ranking table of iron ore reserve holders. Steel
making business in Iran can enjoy amazing advantages of large domestic
market, low energy costs and educated work force and great iron ore
reserves. With 16 mt crude steel output in 2015, 14th is Iran’s position in
crude steel producing countries ranking.
Steel is a strategic commodity for the country of about 80 million. It is
crucial for a developing country to meet steel demand which comes from
massive infrastructure development. For Iran, iron and steel industry is a
basic industry important and necessary for national economy growth and
always has been considered as a supporting industry for realizing the
industrialization of the country.
Iron and steel industries are intensive in terms of technology, capital,
resources and energy, and its development requires a comprehensive balancing
of different kinds of external conditions. In terms of mineral and energy
resources Iran enjoys its high reserves of iron ore and energy resources of
natural gas and crude oil but when it comes to technology and financial
resources, the industry faces a lot of problems.
Iran Aims to Become World’s Sixth Largest Steelmaker by 2025
Largest DRI Producer
Iran is the largest producer of gas based DRI in the world. According to the
latest report of MIDREX, in 2014 Iran’s DRI output was 14.55 mt which after
India with production of 17.31 mt was the second largest producer of DRI.
It should be noted that a large quantity of the DRI made in India is
produced in rotary kilns using coal; therefore, Iran had the largest
production by plants using natural gas as the fuel/reluctant. However by
commissioning new plants, Iran will be dominant producer of DRI in the
world. There are a lot of Direct Reduction based plants under construction.
More than 90 percent of Iran’s targeted 55 mt capacity is based on direct
Iran first took over India after the release of the WSA’s DRI output for the
month of March. World Steel Association’s production figures are based on
data collected from 14 countries, which accounted for approximately 90
percent of the global DRI production in 2014. India has reduced its DRI
production because of the coal-based technology and related additional
expenses that appeared after the government introduced environmental fees
this financial year. As a result, Indian producers are switching to usage of
alternative raw materials. The country’s seven-month DRI production was down
22.7 percent year-on-year to 8.2 mt.
To keep pace with demand in its industry and an economy being billed as one
of the emerging Next Eleven and relying on its iron ore reserves and other
significant advantages, Iran is planning big for the steel industry to
increase its steel production to 55 mt per year by 2025.
Meanwhile, Iranian Mines and Mining Industries Development and Renovation
Organization (IMIDRO) unveiled a comprehensive plan aimed at increasing
steel production capacity in southern Iran. According to IMIDRO, new steel
making plants will be established in Chabahar, Qeshm and Bandar Abbas
To meet 55 mt of steel production, 60 mt of sponge/pig iron, 92 mt of
pellets, 90 mt of concentrate and 159 mt of iron will be required in the
entire value chain of iron ore to crude steel.
According to Iran’s Comprehensive Steel Plan, there will be deficit of 43 mt
of iron ore and 18 mt of pellets which should be imported. It is estimated
that Iran’s steel consumption will be doubled to 41 mt from its current 20
mt leaving 14 mt of oversupply which will be available for exports.
The most significant challenge of steel development based on 2025 plan will
be lack of finance sources from government. It is clear that Iranian steel
companies and iron ore producers need to attract equity funding and loans
from offshore groups.
More Investment Needed to Raise DRI Production Capacity
Iran needs more investment to increase production capacity for direct
reduced iron and most of the new investment in the industry should be
directed to DRI expansion, according to Rasoul Khalifesoltani, secretary of
the Iranian Steel Producers Association, speaking at a conference in Tehran
“Although we do not agree with export of sponge iron, I believe that DRI
export is quite attractive for Iranian producers,” he said.
“Turkey, the neighboring country, is a huge importer of ferrous scrap and it
could replace a portion of its scrap imports with sponge iron, if we develop
our production enough,” he said. “There is demand for at least 10 mt/year of
sponge iron in Turkey,” he estimated.
“On the other hand, shortage of sponge iron is a challenge for Iranian
expansion projects and more DRI modules should be installed in Iran,” he
Khalifesoltani noted that the Iranian steel development expansion to 55
million mt/year capacity by 2025 is being realized but new investment for
production of 11 million mt/year of iron ore concentrate, 6 million mt/year
of iron ore pellet and 12.5 mt/year of DRI is still needed.
He also predicted that Iran’s capacity to export steel will be increased to
some 20 mt/year proportional to the increase in output up to 2025, which
will comprise about 11 mt/year of flat products, 6.5 mt/year of longs and
about 2.5 mt/year of semi-finished products.
As a result of cheap natural gas, Iran is one of the world’s biggest
producers of DRI. The country produced some 16.01 mt of DRI in 2016, up
10.1% year on year.
Some 85% of Iran’s steel industry is based on direct reduction
technology for steelmaking using natural gas instead of coal.
Iranian mines and metal state holding IMIDRO, in February said it is
negotiating with Japan’s Kobe Steel to use its technology at reducing water
and energy consumption by Iranian DRI modules.
Iran Steel Production 1991-2017
Steel production in Iran decreased to 1785.30 thousand tons (tt) in June
from 1790 tt in May 2017. Steel production in Iran averaged 767.23 tt from
1991 until 2017, reaching an all-time high of 1790 tt in May of 2017 and a
record low of 166 tt in September 1991.
June 2017 Crude Steel Production
World crude steel production for the 67 countries reporting to the World
Steel Association (worldsteel) was 141.0 mt in June 2017, a 3.2% increase
compared to June 2016.
World crude steel production was 836.0 mt in the first six months of 2017,
up by 4.5% compared to the same period in 2016. Asia produced 576.8 mt of
crude steel, an increase of 4.8% over the first half of 2016. The EU
produced 86.1 mt of crude steel in the first half of 2017, up by 4.1%
compared to the same period of 2016. North America’s crude steel production
in the first six months of 2017 was 57.4 mt; an increase of 2.4% compared to
the first half of 2016. The C.I.S. produced 49.7 mt of crude steel in the
first six months of 2017, a decrease of -2.5% over the same months of 2016.
- Crude steel production reached
mt in June 2017, up by 3.2% over June 2016 (YoY)
World crude steel production was 836.0 mt in the H1-2017, up by 4.5% YoY
- Produced 576.8 mt of crude steel in H1-2017, an increase of 4.8% YoY
China - Crude steel production was 73.2 mt, up by 5.7% YoY.
Japan - Produced 8.4 mt, down by -4.3% YoY
- Produced 86.1 mt of crude steel in H1-2017, up by 4.1% YoY
Germany - Produced 3.6 mt, down by -1.7% YoY
Italy - Produced 2.1 mt, up by 1.8% YoY
3 mt, up by 7.1% YoY
Iran - 1.8 mt, up by almost 16% YoY
US - Produced 6.7 mt, down by -1.7% YoY
- Produced 2.9 mt, up by 13.2% YoY
- Produced 49.7 mt of crude steel in H1-2017, a decrease of -2.5% YoY