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MSC chief: Iran’s 2025 steel production target with eye to world markets sure to succeed


A specialized meeting on Iran’s Steel Plan and its 2025 Horizon was held on the sidelines of the 13th International Trade Fair for Construction Machinery & Vehicles, Mining, Building Material Machines and Natural Stone Industry (Iran ConMin 2017) in Tehran.
The specialized workshop was attended by Mohammad Reza Bahraman, president of Iran Mine House, Bahram Shokouhi, a board member of the House and head of the Mining Department at Iran Chamber of Commerce, Industries, Mines and Agriculture and a host of mining managers and experts as well as members of the media corps. In the meeting, Managing Director of Mobarakeh Steel Company (MSC) Bahram Sobhani submitted a full report on the state of Iran’s 55-million steel production target, and the requirements associated with striking a balance in the steel production chain.        
Dr. Sobhani pointed to Iran’s per capita steel consumption of around 215 kg and the reasons behind setting a 55-million-ton target of steel production and said, “By 2025, if Iran’s population grows to about 90 million and its per capita consumption stands at around 330 kg, it will need 30 million tons of steel for domestic purposes and the remaining production capacity should be sold in export markets. The fact that Iran is blessed with advantages such as gas, energy, mines and talented workforce has set the stage for the country to make efforts to tap into the existing potential and produce 55 million tons of steel. Such a goal is not ambitious and inaccessible if the existing hurdles are cleared.”     
The MSC chief highlighted the need for manufacturing cost-effective products and raising steelmakers’ competitiveness vis-à-vis rivals and said the production chain faces challenges such as: limited use of the installed capacity; the fact that active and under-construction production units are geographically dispersed; uneconomical potential; incompleteness and imbalance of the production chain and production technologies; low efficiency of the workforce; and inattention to the needs of export markets.     
Dr. Sobhani further said in light of the fact that transportation costs should be added to the challenges in question, it is no secret that all these challenges would deal a blow to the country’s competitive advantage.
As for the current state of the country’s steelmakers and the reasons behind their lossmaking, he said that MSC is now producing at full capacity (100 percent) in all its units. “The potential capacity of the country’s steelmakers is 30 million tons and their actual capacity stands at 20 million tons; that means only 66 percent of the potential is being tapped. That is why production units are making losses.”
To meet the 2025 production target, the country needs to produce certain amounts of iron ore, cast iron, pellets, agglomerates, and concentrates, the MSC chief said. “We are facing shortages of raw materials, considering the output capacity of all active and under-construction facilities in all departments. If these shortages are removed, as I said earlier, we will face another problem: geographical dispersion of production unit. There are only three units whose production capacity exceeds 2 million tons. Together, a group of 51 units in the country is seeking to produce 5.8 million tons of steel. All these units need electrical substations, roads, water and other materials for their production processes. The fact that they are geographically dispersed causes them to lose their competitive edge as far as production is concerned.”   
He also described low efficiency of the workforce as another problem of production units in terms of competitiveness, and said the global average is two man-hours per ton. “The average in Central Asian nations, which stands at around 6 man-hours per ton, is not satisfactory. This comes as in Mobarakeh Steel Company, which has the highest production capacity in proportion to its staff, the average is 5 man-hours per ton. Compared with other sectors in the country, this average is fairly satisfactory, but it is still far behind the global average.” 
If the country seeks to remove such problems, he said, it needs to opt for modern technologies so that it can produce quality items. “With an eye to global markets, we should define and identify target markets and produce goods which conform to global needs. We should not forget the fact that developed countries, which have left behind their construction period, need quality, special steel products.   
He went on to describe attention to climactic conditions as one key factor in Iran’s meeting of the 55-million-ton production target and said, “We need to take heed of the infrastructure and costs associated with the interdepartmental transfer of materials, and exports of products to target markets at home and abroad. We should review the places these production units should be built and the capacity they should run so that we can render the cost prices competitive.”   
According to the correspondent of Steel Newsletter, later in the meeting, an attendee asked the MSC managing director if his company has adopted a method to supply raw materials from foreign countries for the steel chain. Dr. Sobhani said as it was mentioned earlier, imports of iron ore and raw materials would be economical for the companies which have access to high seas and that his company has taken it into account,
In response to a question on the reason behind an increase in EU tariffs on steel imports, the head of the giant steelmakers said, “Today tariffs which are imposed on imports are a protectionist move to allow local production units to stand on their own two feet. Moreover, the imposition by the EU of tariffs is not limited to a certain country; rather, it covers all countries which export their products to Europe.”
On the obstacles standing in the way of development, Dr. Sobhani said investment is one such big obstacle. “In other countries, low-interest loans are offered to those involved in production and development; in some cases these finances come in the form of interest-free, long-term loans. For its part, Iran can encourage the private sector and reduce the risks associated with foreign investment so that investors can channel their finances into the production sector.”           
Asked about how Iran’s production can be successful, he said that with an eye to international markets and a crafted development strategy we can prepare the ground for our companies to remain in the competitive production cycle.
The MSC chief then explained why his company’s exports have dropped, especially in recent months and said, “Iran is walking out of recession now. Naturally, as the country experiences economic boom, its need for steel products, including steel sheets, grows. To lend more support to domestic production, Mobarakeh Steel Company has maintained its share of export markets as it has sent a bigger part of its products to domestic markets.”
Dr. Sobhani said that the world’s giant steelmakers too have merged their small-sized units in a bid to maintain their competitiveness against China. “Without a doubt, mergers in Iran too can help small-sized units survive and make profits.”
Later in the meeting, the MSC chief answered different questions on the reasons why, unlike Turkey, Iran does not use scrap iron in steel production, the goal of creating a steel consortium in Bandar Abbas, the role of MSC in this consortium, the role of MSC affiliates in the company’s production cycle, and the pricing formula for steel products. His detailed answers to these questions drew the attention of all attendees.  
 


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