By possessing 2.7 billion tons of proven iron ore reserves containing 1.5 billion tons of iron and estimated total reserves of 4.5 billion tons, 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 million tons 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. The Iranian steel industry will face an array of challenges in the next decade. Severe shortage is obvious of capital since the central government is not able to provide direct finance. On the other hand capital from domestic sources is extremely expensive.

Iron ore production and exports
In 2015, iron ore production was 36 million tons which declined 20 percent from 45 million tons of year 2014 and 20 million tons lower than its 56 million tons peak in year 2013. The same trend is obvious in iron ore exports. Iron ore exports have been decreased steadily in the last three years from its 23.6 million tons peak in 2013 to 14.1 million tons in 2015.
Significant part of decrease in Iran’s iron ore production comes from small private mines. The main part of iron ore mined in private mines is crushed iron ore which is used in blast furnaces. Currently local costumer of crushed iron ore is Zob Ahan Company which utilizes blast furnace process with two million tons per year capacity. Consumption of the company is limited so the largest part of this kind of iron ore cannot be sold in domestic market. Decrease in Chinese steel makers’ production, the main consumer of Iran’s iron, caused sharp decrease in Chinese demand for Iranian iron ore which consequently caused lack of demand for iron ore products of private mines.  Sharp decrease in iron ore prices also affected the performance of these mines, because they could not be able to compete with their competitors in Chinese market. Sanctions addressing banking activities of Iranian and their foreign partners as well as embargos on shipping lines increased export costs of Iranian companies.

Steel products
According to report published by WSA, in 2014, Iran’s hot rolled steel production was 16.48 million tons including 8.2 million tons (49.75%) hot rolled long products and 8.28 million tons (50.25%) hot rolled long products. It is estimated that total capacity utilization of steel products in Iran is about 50 percent.   Based on this report, Iran’s finished steel products consumption in 2014 was 17.25 million tons which is less than its peak at 20.94 million tons in 2011. Per capita steel products consumption was 221 kg in 2014.

The 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 million tons which after India with production of 17.31 million tons 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 million ton capacity is based on direct reduction technology.
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 million tons.

2025 plans
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 million tons 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 regions.
To meet 55 million tons of steel production, 60 million tons of sponge/pig iron, 92 million tons of pellets, 90 million tons of concentrate and 159 million tons of iron will be required in the entire value chain of iron ore to crude steel. According Iran’s Comprehensive Steel Plan, there will be deficit of 43 million tons of iron ore and 18 million tons of pellets which should be imported. It is estimated that Iran’s steel consumption will be doubled to 41 million tons from its current 20 million tons leaving 14 million tons 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.

Source: Metal News