Iran has been one of the fastest growing steel producing countries in the world over recent years. Crude steel production in the country increased by 65% over the past ten years and at 16.1M tonnes, Iran has become the fourteenth largest producer globally with by far the greatest output in the Middle East. This growth has continued so far in 2016 with production up nearly 10% in the first ten months of the year.
Part of the reason for this rapid development of their steel industry is likely to be the relative isolation the country has found itself over the years due to economic sanctions, along with a ready supply of iron ore which has enabled them to become relatively self-sufficient. With sanctions lifting this year, demand for steel in the country is likely to grow considerably in the coming years.
This isolation and growth in the domestic industry means that Iran imports relatively low quantities of steel which reduced from 12.7 million tonnes in 2007 to just 3.1 million tonnes in 2013. Since then, imports have risen slightly to just over 4 million tonnes each year and have remained relatively stable, although in the first nine months of this year they have grown by more than 20%. In a story that is familiar in many parts of the world, much of this growth has been in “alloy” HRC, plate and CRC from China.
Shipments from China have grown by 47% to 578K tonnes so far this year with the country representing the second largest source of steel with only the UAE shipping more. In actual fact though, a closer inspection of the shipments from UAE reveals that the bulk of this tonnage is likely originating from somewhere else with the UAE acting as an intermediary. A significant proportion of the increase in imports from the country appears to be the “alloy” flat products that Chinese producers export in order to qualify for tax rebates so it seems reasonable to assume that much of the 29% growth seen in imports from the UAE also originate in China.
The vast majority of production in the country is destined for the domestic market, although Iran does seem to be starting to export more. At its lowest level in 2012, they were exporting just 260 thousand tonnes of steel but since then this has been on the increase. In 2015 exports hit 3.8 million tonnes and have since grown even more so far this year. In the first nine months of 2016 alone, the country has exported 4.3 million tonnes, more than the whole of 2015 and representing a year on year growth of 41%.
The majority of this growth has come from increased shipments of ingots and semis with larger quantities of ingots being shipped to other Middle East nations; a growth of slabs being exported to Morocco, Brazil, Thailand and Taiwan, and a rise of other semis going to Oman, Thailand and Taiwan.
The Iranian steel industry is at an interesting point in its development. Since economic sanctions were lifted at the start of this year, the country is becoming increasingly “open to business” which should offer opportunities for overseas steel producers to exploit a new and growing market. Over a five year period ending in 2020, Iran is seen to be one of the fastest growing steel sheet markets in the world. The country’s steel sheet consumption growth is forecast to be more than double the world average over 2015-2020. Due to the relative strength and low-cost nature of Iranian steel producers, however, it seems likely that much of any growth may be taken up by domestic production and the only country so far that has managed to exploit the opportunity here to any great degree is predictably China.
Indeed, as Iranian steel producers become more outward looking, they may represent a threat in overseas markets although to date they have only really been active in the semi-finished steel markets but with shipments of slab to Thailand growing considerably it seems they have picked up some of the business that was being supplied by SSI in the UK.