World  Business and Economic Analysis 


  • POSCO to construct $1.6b steel mill in Iran


    Iran and the Republic of Korea on Monday signed three agreements in the form of one memorandum of understanding (MOU) and two memorandums of agreement (MOA) during Iran-Korea Business Forum in Tehran.

    Worth about $1.6 billion, one of the MOAs was inked between Korean steel maker POSCO and Iranian steelmaker Pars Kohan Diar Parsian Steel (PKP), to jointly build a steel mill in Iran's Chabahar Free Trade-Industrial Zone.

    The steel mill will be built based on POSCO’s FINEX technology, touted to be more environmentally-friendly and cost-efficient compared to other steelmaking methods.

    Moreover, during the event, POSCO Energy, a POSCO's electricity-generating affiliate, signed a memorandum of understanding (MOU) with PKP to build a 500 megawatt power plant fed by excess gas generated by the envisioned steel mill, said the Korea Times.

    Also, in cooperation with Korea Electric Power Corp. (KEPCO), POSCO Energy will construct a desalination facility in the same area with a desalination capacity of 60,000 tons of seawater per day.

    Another MOA was inked between the Korean Doosan Heavy Industry and Construction and the Iranian Negin Mokran Development Company (NMDC).

    South Korean steel makers controlled more than half the Iranian market before the Western sanctions were imposed, according to POSCO’s research center, Reuters reported.

    Participating in the seminar were Joo Hyung Hwan, Korean minister of trade, industry and energy; Kim Seung-ho, the South Korean ambassador to Tehran; Mohsen Jalalpour, president of Iran Chamber of Commerce, Industries, Mines, and Agriculture; Valiollah Afkhami, head of Trade Promotion Organization of Iran; and Junggwan KIM, vice president of Korea International Trade Association.

    The forum was organized by Korea International Trade Association (KITA) and Korea Trade-Investment Promotion Agency (KOTRA), wherein 500 participants from 300 companies were present.

  • Iran 2025 Steel Vision Reviewed





    The Iranian steel industry is pushing ahead with its ambitious plan to become the world’s sixth largest steelmaker as per its 2025 Vision Plan. New crude steel and raw material output capacity are being added every year and production is following a growing trend.
    Maintaining a steady growth to realize the target is a complicated task. The raw material supply is unbalanced across the spectrum, production is growing at a slower pace compared to capacity-making, steel usage is falling and exports need to increase further.
    For the last two years, Foolad Tehnic International Engineering Company has been studying the Iranian steel market and industry, and reporting on the expansion progress at the request of various companies and organizations. FIECO’s project is titled “Monitoring the Comprehensive Steel Plan.”
    The Comprehensive Steel Plan was first floated in 2004 and integrated into the Fourth Five-Year Development Plan (2004-9) the following year. The plan was revised in 2007 under the title “Iran’s Industrial Development Strategy,” in which the 55-million-ton output target was first introduced.
    The macro-planning did not exactly go as expected, as more than a few issues such as the imbalance in steel production chain surfaced.  Accordingly, FIECO stepped in to monitor the industry and provide a detailed report of its shortcomings. Its second report on the steel plan was published in early June.
     Unbalanced Steel Production Chain
    The first part of the report indicates nominal steel and raw material capacity and real output during the previous four years, from 2013-14 to 2016-17.
    Nominal crude steel capacity remained unchanged at 22.5 million tons for the first two years of the period. It increased to 23.7 million in the third year and jumped to 29.8 million tons in 2016-17.
    Also, 4.82 million tons are expected to be added to the capacity by the end of the first half of the current fiscal year (March 21-Sept. 22). Crude production experienced a seesaw trend, as it stood at 16.10, 17.54, 16.7 and 18.51 million tons during the four years respectively.
    As for direct-reduced iron, capacity grew steadily, standing at 19.65, 22.15, 22.3 and 24.45 million tons respectively. It is bound to grow by another 6.4 million tons by the end of the first half. And with the exception of 2015-16, DRI output grew an average of 1 million tons every year to 18.51 million last year.
    Struggling with pellet shortage and the necessity of imports was a common theme for mills in the past. Statistics indicate that pellet production capacity remained nearly unchanged from 2013-14 to 2015-16 at 22 million tons. However, it rose to 32 million tons last year and will have 8.22 million tons added to it as a host of new plants are set to come on stream by late September.  
    The output of such a highly sought-after material was mostly close to its capacity, standing at 20.76, 21.57, 21.50 and 25.62 million tons respectively.
    The imbalance in production chain can be witnessed in the case of iron ore concentrate, where expansion happened too rapidly and left behind pellet development.
    Concentrate capacity rose by about a million ton to reach 30.27 million tons in 2014-15 and suddenly jacked up to 43.4 million tons the next year where it stabilized.
    The sector also has 2.2 million tons of capacity coming its way soon.
    As for production, stats indicate it barely had time to react to sudden capacity boosts and was about 13 million tons less than last year’s capacity.
     Raw Material Needs
    According to FIECO, Iran will require production capacities of 168 million tons of iron ore, 86 million tons of concentrate, 87 million tons of pellet and 57 million tons of DRI to be able to materialize a 55-million ton steelmaking capacity.
    By analyzing Iran’s development projects, FEICO has calculated the current capacity, the best-case scenario added capacity and the deficiency in each sector.
    There’s currently an 80-million-ton iron ore output capacity in place and if all the expansion projects the government has announced were to come on stream, the number would rise to 130 million tons. A 38-million-ton shortage to reach 2025 target still looms large.
    As for concentrates, deficiency stands at 16 million tons, as in the best case, a 26-million-ton capacity will be added to the 44 million tons already in place.
    Pellet is doing better since the potential upcoming capacity of 45 million tons is larger than the current 38-million-ton capacity. That would leave pellet-makers with 5 million tons to add.
    And DRI deficiency is projected to stand at 9 million tons. Potential upcoming capacity is 20 million tons and current capacity is 28 million tons.
    FIECO projects that €8.98 billion of investments are required to cover the deficiencies and reach the 2025 steel target. The total numbers break down to €3.78 billion of investment needed for crude steel capacity-making €1.653 billion for DRI, €1.304 billion for pellets and €1.969 billion for concentrate.
    Moreover, €14.07 billion will be needed to develop the industry infrastructure. Railroad developments account for €4.8 billion of the aggregate figure, €4.26 billion for electricity, €1.91 billion for water, €1.3 billion for ports, €980 million for mining equipment, €560 million for roads and €268 million for gas.
     The Necessity of Exports
    Another part of the 2025 target projects exporting 20 million tons of steel, as the whole 55 million tons are simply beyond Iran’s local demand.
    A combination of galloping inflation, economic sanctions and the ill-famed Mehr Housing Scheme caused mortal harm to Iran’s construction sector, and consequently to steel demand.
    Many steelmakers, especially long producers, are struggling to find buyers for their goods and look at exports as the only way forward. The scenario at home is unlikely to change until 2025, which further underscores the necessity of exports.
    According to FIECO, Iranian semi-finished steel exports have followed an upward trend ever since the 2013-14 fiscal year, reaching from about 300,000 tons to nearly 4 million tons last year. Finished steel shipments nearly set the same record, with exports only dropping about 300,000 tons to 1.99 million tons last year.
    The report envisions three scenarios for Iran’s steel export expansion. The first considers maximum export potential, calculated using Iran’s trade track record and destination markets’ potential demand, which stands at 9.5 million ton/year.
    The second is based on Iran’s share of the global steel market, putting the number at 11.2 million tons/year.
    And the third most optimistic one is based on the industry’s average growth in exports for the last five years, which brings the number up to 16.6 million tons/year.
    All three scenarios would yield results far from 20 million tons/year, but boosting exports by any means necessary should still be on top of the industry’s agenda.
     Call for More Large-Scale Production
    Out of the current 29.7-million-ton crude capacity, 3.3 million tons of it pertain to plants with capacities of 200,000 tons and less, which predominantly utilize induction furnaces. The small-scale plants offer lower prices and of course lower quality, too, as the steel made using induction furnaces does not possess the quality to be able to meet all downstream demands.
    About 76% of Iranian steel are made using EAF with DRI feedstock and the percentage is bound to reach 80% by 2025.
    FIECO’s report suggests “industry policymaking to keep up with the field’s technological development,” indicating that steelmakers should move toward higher quality and more competitive pricing by using a method that utilizes all of Iran’s competitive advantages, such as low energy costs.
     2015-17 Rollercoaster Ride
    In 2015, the installed global steelmaking capacity grew compared to the year before but production marked a significant decline. This was the first time global steel output shrank ever since the 2008 crisis.
    China’s huge investments and incentive policies prevented the country’s production from dropping in 2008 and were actually successful in boosting output and keeping the market up. But in 2015, China had become a behemoth. Its ever-growing output, coupled with the global overreliance on Chinese production and exports, was one of the main causes of global industry depression.
    Usage shrank worldwide and demand dropped. China’s dumping strategies made things no better and eventually eviscerated prices. Many steelmakers were simply unable to keep up and continue, and especially in Iran, dropping iron ore prices also drove many miners out of business.
    Things improved the next year. Iron ore prices ended 2016 higher, as Chinese ore demand and steel usage grew. And interestingly, China’s exports during the year were down compared to 2015, giving exporters worldwide a chance to breathe.
    FIECO’s report indicates that no significant turn in the market trend is expected to occur in 2017. China’s growing debt to GDP ratio will mean fewer incentives in the market for the year and lower growth.
    Markets are also skeptical whether US President Donald Trump’s election promise to inject $1 trillion into infrastructure development will materialize.
    Iron ore supply will remain unchanged and prices will correct the bubble. The Iranian steel industry then will only have its own policymaking to watch.

  • Mittal signs €1bn iron deal in Iran


    Mittal Steel has signed a contract worth €1 billion to produce iron in southern Iran.

    Global industrial giant Mittal Steel on Tuesday signed a contract worth €1 billion to produce iron in southern Iran.

    The contract that has been signed with Mahan Industries and Mines Development Company – a subsidiary of Iran’s Tourism Financial Group – envisages extracting iron and the establishment of a processing plant in the country’s southern province of Kerman.     

    Mahan has not specified which specific iron mine will be the subject of the deal with Mittal but it owns a major mine near Sirjan which is considered to be one of the largest in the country with a reservoir of about 1.2 billion tons.  The company last year won a deal to extract 24 million tons of iron from the same mine for 14 years.

    Mittal Steel is also based on the same deal expected to take charge of managing Mahan’s Bonab steel production complex in northwestern Iran for a period of five years.

    Located near Tabriz, the capital of East Azerbaijan province, Bonab complex has an annual production capacity of over 3.5 million tons and is considered the biggest private sector steel production project in Iran.

    Tourism Financial Group – a major holding that controls a chain of banks, financial institutions, tourism enterprises and industrial firms – has announced in a statement that it expects the deal with Mittal to help transfer the technical knowledge in the steel industry to Iran.  

    It has also said it expects the deal to help Iran export steel products to regional and international markets through partnership with Mittal.  

کتاب عملیات بانکی در عرصه بین الملل -سرفصل ها،ضمائم ،توصیه صاحب‏نظران ارزی و مدیران ارشد بانکی

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