CRU: Iranian Steel Growth Story at Risk of Coming to a Screeching Halt

This deal, meant to ease economic sanctions on Iran in exchange for restrictions and monitoring of the country's nuclear programme, was entered between P5+1 nations (China, France, Germany, Russia, the United Kingdom and the USA), the European Union and Iran.  Withdrawal of the USA from this deal means that they will re-impose secondary sanctions on Iran in a phased manner starting August 6th, 2018, thereby exposing any businesses with an American affiliation or ownership interest undertaking a deal with Iran to enforcement actions.  More importantly, these sanctions will restrict access of Iranian businesses (or people dealing with Iran) to the US financial system.

Re-imposition of economic sanctions by the USA are likely to have major repercussions on the country's steel industry.  In particular, it will impact on Iran's booming international steel trade, even though there are certain trade arrangements in place without US links.  In this insight, CRU assesses the potential impact of this development on Iranian steel trade and the country's ongoing steel capacity expansion plan (which aims to increase the country's crude steel capacity to 55 Mt/ y from current capacity of 32 Mt /y).

Iranian steel industry performance – post the Iran Deal
As soon as the historic Iran Deal was struck between world powers and Iran, the country pushed forward with a Comprehensive Steel Plan; which aimed at increasing the country's crude steel production capacity to 55 Mt by 2025.  Investments in this plan were spearheaded by state-owned steelmaker Mobarakeh Steel Company (MSC) and Iranian Mines & Mining Industries Development & Renovation Organisation (IMIDRO).  Both these organisations formed joint partnerships with various public/private sector players to invest in the steel value chain, ranging from DRI production to downstream steel products.

Although foreign investment remained limited, except for a few Chinese investors, the plan translated into sharp growth in the country's crude steel production.  Between 2014 and2017, Iranian crude steel production saw an impressive CAGR of 9.1% (see chart), making Iran the world's 13th largest steel producer in 2017 with an output of over 21 Mt.  Looking at March 2018 data alone, Iran was the world's 10th largest crude steel producer.

Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2018/iranian-steel-growth-story-at-risk-of-coming-to-a-screeching-halt/ 

Read more about CRU: http://bit.ly/About_CRU 

About CRU

CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.

CRU employs over 260 experts and has more than 10 offices around the world, in Europe, the Americas, China, Asia and Australia – our office in Beijing opened in 2004.

When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.

CRU – big enough to deliver a high-quality service, small enough to care about all of our customers.