For the time being it would not be in any way realistic to refer to Iran as the second China, or as the second India for that matter, as far as its steel industry is concerned. However, looking at the remarkable progress the country's steel industry has made in the last couple of years, along with the massive investment plans Iran has announced for the upcoming years, it may be assumed that the Iranian steel industry will in the future emulate, if not the success of China, at least the progress that has been observed in India. The Iranian steel industry came into existence with the establishment of two steel mills in the mid-60s under pressure from strong domestic demand for steel products, primarily from the country's growing gas and oil industries. To help meet this demand, the Iran Steel Industry National Group, with a nominal capacity of 65,000 metric tons of structural steel and semi-finished products, was established. In parallel, in accordance with the inter-governmental contract between Iran and the USSR for the transfer of natural gas from the former to the latter in exchange for heavy industry technology, the Esfahan steel plant with a rolling capacity of 550,000 metric tons of structural steel was set up. Starting from these two plants and specializing only in long products, Iran was to see remarkable development in its steel industry. In 1992, Iran's first flat rolled steel mill, Mobarakeh Steel Company, with an annual capacity of 2.5 million metric tons of crude steel was set up to satisfy the country's growing demand in cold rolled and hot rolled steel. Although specializing at first just in long products and adding flats only in the early 90s, the range of steel products now produced in Iran includes different kind of profiles, rebar, plain and round bar, different types of pipes, HR, CR, HDG, slabs, billets, ingots and blooms. According to the latest data (2006) of the International Iron and Steel Institute (IISI), Iran occupies 20th place in the world's crude steel production chart. However, even though Iran's steel industry has been operating since the 1960s, it only began to receive real impulse for development starting from the late 1990s. For the current Iranian year (21-03-2006 to 20-03-2007), Iran is expecting to register 10 million metric tons in crude steel production and a bit more than that for finished steel products. Iran's statistical data for years 2000 through 2005 (million metric ton)
2000 2001 2002 2003 2004 2005
Crude Steel Production 6.6 6.9 7.5 7.95 8.9 9.6
Finished Steel Production 5.69 5.9 7.5 8.1 9.1 9.9
Imports 2 2.2 1.8 2.9 3.3 2.95
*- Import data is taken from UN Comtrade Database
Judging on Iran's ambitious plans to reach a level of 29 million metric tons of crude steel by 2010 (slightly below Brazil's crude steel production for 2006) and about 55 million metric tons by 2020 (approximately South Korea's level for 2006) along with its announcements of new projects, its current achievements seem to be only the start for the Iranian steel Industry. In the current Iranian year alone, the government has announced dozens of projects to stimulate the development of the country's steel industry. The main projects are directed toward the development of high-value added products and the use of new technologies.
In line with the push for steel industry development, in autumn 2006 the Iranian authorities announced the establishment of eight new steel mills in less developed provinces of the country, each with a capacity of 800,000 metric tons of construction steel, to be constructed within a 36-month period.
In parallel with projects for long product capacity expansion, Iran is investing in the expansion of its flats capacity as well. One of the most ambitious plans in the current Iranian year came from the country's largest flats producer, Mobarakeh Steel. In September 2006, the company announced that the authorities had approved its and its subsidiary Saba Steel's capacity expansion by two million metric tons and by 700,000 metric tons respectively with a total investment of $1.008 billion. Moreover, early in January this year, the Iran Steel Producer Association made available about $90 million in loans for expansion of the country's cold rolled production capacity to about five million metric tons by the end of the current Iranian year (20-03-2007). These loans are to be used to help Iranian flats producers to import semi-finished products.
A large part of the success in the development of Iran's steel industry rests on the ability to attract both domestic investment and foreign direct investment (FDI). To achieve the former, the Iranian authorities announced in early December that the 70 largest state-owned companies were to be privatized. As a part of the first phase of this privatization campaign, preparations were made for the offering to the public of shares in Mobarakeh Steel Co. and Esfahan Steel Co. As for the FDI, the Iranian authorities were able to attract investments from Indian and European companies. Thus, early in February, two Indian companies - Tata and Jindal - along with German company Ascotek, signed agreements for the establishment of steel plants in Bandar Abbas in southern Iran, with respective planned capacities of five, two and 1.5 million tons. In addition, very recently the Iranian authorities announced that the country's Ministry of Industry and Mines had concluded the initial stage of negotiations with an European investment company, which is planning to spend approximately $10 billion in various Iranian industries, including the steel industry.
One of the biggest problems of the Iranian steel industry from its inception has been the issue of raw materials supply. Although rich in gas and holding more than five billion metric tons of iron ore in reserves, Iran lacks scrap and coal production facilities. Therefore, production by using traditional blast furnace methods in steel production has become very costly for Iranian steel mills. As a result, many new mills established in Iran have started to employ the direct reduced iron (DRI) method. One of the plants that have been equipped with a DRI unit is Khorasan Steel Co, which has a capacity of 600,000 metric tons per annum. This DRI unit was built at the plant in 2003 and has allowed it to increase steel production without depending on coke supplies. In addition, the plant has taken steps to construct two sponge iron making units. Each unit has a capacity of 800,000 metric tons of sponge iron per annum and will allow Khorasan Steel to satisfy 85 percent of its raw material needs.
With such massive investments, attracted from both domestic sources and in form of foreign direct investment, Iran has a good chance of becoming a second India in the very near future and of even surpassing its 2020 target of 55 million metric tons of crude steel. In addition, the use of DRI technology in steel production as well as the development of sponge iron production will allow Iranian steel mills not only to be more self-sufficient in raw materials but may also give them a price advantage in the world steel market, since they will be less vulnerable to fluctuations in the international scrap and coke prices.