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MSC procures 92 percent of products it needs locally

Today support for local economy and domestic production is a major strategy on the agenda in every developed or developing country in the world; thus in a protectionist move some members of the World Trade Organization impose unconventional tariffs on imports to give local industries an edge over foreign competition and boost employment.
In Iran, the Supreme Leader has been emphasizing support for local industries over the past few years. Obviously, in the fiercely competitive world of today, the only countries which can remain in contention are those which have attained self-sufficiency when it comes to GDP. And that would be impossible to achieve unless everyone throws their weight behind national production and local economy.
The following is the excerpt of an interview a Steel Newsletter correspondent conducted with Mehdi Tavalaian, MSC's procurement chief, on the conduct of the giant steelmaker when it comes to support for local producers and consumption of locally-made products.
Q. What measures has Mobarakeh Steel Company taken to support locally-made products and make maximal use of the domestic potential?
A. Throughout the world steelmaking is viewed as a key industry and pillar of other major industries. In Iran too, iron ore mines and other suppliers of raw materials are in the upstream of this industry; while manufacturers that use sheets and other steel products to develop their final products are in the downstream. When MSC became operational, 70-80 percent of the equipment and items it needed, including metal structure, was brought in from abroad because the technology to develop these items locally was nonexistent.
However, in light of the fact that transfer of technical knowhow was important and there were several advantages associated with indigenization of such products, MSC moved to empower local firms and contractors whose work was related to steelmaking. It is with honor that I announce today local sources account for 100 percent of MSC’s iron ore needs, almost 80 percent of raw materials and energy and 92 percent of other products we need. As for the small percentage which is still imported, we have been in contact with different Iranian firms to tap into local potential and produce them domestically. For example, graphite electrodes are one of the most important items used in electric arc furnaces. Buying these electrodes constitutes one of the biggest challenges faced by steelmakers which use electric arc furnaces in their production process. To make that problem a thing of the past, Mobarakeh Steel Company and the Iranian Mines and Mining Industries Development and Renovation Organization have made huge investment. We hope those measures will soon bear fruit.
Q. Would you tell us more about the products MSC needs?   
A. Raw materials and energy account for up to 81 percent of MSC needs. Of that figure less than 1 percent is imported. As I already said graphite electrodes and ferroalloys are among imported items. Measures to access the technical knowhow to produce them locally and replace imports are on our agenda. Two percent of the remaining 19 percent are consumables such as clothes, shoes, ball bearings, etc. Up to 90 percent of the items that fall into this category are produced domestically. Only 10 percent, including ball bearings and conveyor belts, is imported. Of course, coordination has been made to produce these items locally too. We seek to bring in the technical knowhow needed for their production. As for consumables, as much as 99.8 percent is produced locally. When it comes to machinery and spare parts, which account for six percent of all MSC purchases, I should say, more than 55 percent is produced within the country's national borders. Imports mostly cover catalog parts which are specific to certain manufacturers. Even in this case, MSC seeks to replace imported products with local brands and has achieved a lot of success already.
Q. Are there any products local manufacturers do not have the knowhow to develop?
A. Yes. Due to strategic reasons some imported items are not produced domestically. However, efforts are being made to replace these imported items with Iranian-made products in a bid to boost domestic production and wean the country off imports from foreign countries.
Q. How do you evaluate indigenized goods and equipment in terms of quality?
A. For a number of goods, local firms have fared better than their foreign peers. It is a source of pride for Mobarakeh Steel Company and its suppliers that the materials and equipment they produce are on par with foreign-made items, quality-wise. Overall, less than eight percent of what the company needs is provided by foreign firms. In all areas, including in contracts, and in the supply of equipment and raw materials, we hope to be able to meet our needs domestically in the next few years thanks to the measures the company has taken.
Q.  Would you tell us about MSC’s big achievements in indigenization of goods and equipment?
A.  MSC has indigenized production – under license – of reformer pipes, building on the technical knowhow of the manufacturing company and in cooperation with local firms. The company’s need for sensitive cogs and rolling is met locally. The Iranian-made cogs and rolling are better than foreign ones and the Iranian producers have even exported their goods. As for refractories, molding powder and raw materials such as CPC, we have started domestic production. These items are now being mass-produced.
Q. Would you please elaborate on the transfer of technical knowhow?
A. Based on agreements inked with a number of big European companies, the latter has opened steel works in Iran to produce high-tech products using Iranian workforce. These facilities are built on foreign capital and are run by foreign management. Their high-tech products are shipped to domestic and overseas markets. Some Iranian firms have signed long-term contracts with these foreign companies.
Q. What is the main achievement of such indigenization?
A. It largely helps Iran transfer the technical knowhow and have access to the technologies needed for building steelmaking plants. We can also join hands with other Iranian firms to produce quality goods. On top of that, measures as such will help create jobs and bring in foreign capital.
Q. What measures has MSC’s procurement department taken to tap into the potential of all manufacturers?
A. Mobarakeh Steel Company has launched a supply database in which goods have been divided into different groups. This helps piece together a comprehensive database of suppliers in different sections.
The company focuses on measures to strengthen commodity groups whose suppliers are either foreign or the number of their suppliers is low. Local products whose quality is not that good have priority. By and large, as many as 4,428 suppliers have been registered in the company’s supply database.
Q. What has MSC done to continue walking down the path to success?
A. We can mainly assure local and foreign companies that MSC will, in the long run, purchase their products in case the technical knowhow is transferred into the country. We can rightfully claim that giant steps have been taken toward the transfer of technical knowhow in the country over the past few years. The brilliant results of such measures will be on display by yearend and more locally made products will be sent to the market. I should say that hardly can you find an item or equipment in the steel industry for which Mobarakeh Steel Company has not make planning inside the country.
Q. Generally speaking, how do you evaluate the role MSC plays in transferring the technical knowhow?
A. By transferring the technical knowhow of the steel industry into the country, Mobarakeh Steel Company, as the driving force behind the industry sector, has contributed to the growth of all industries.
Thanks to this process, powerful manufacturing companies, contractors and assembly companies have been created in the country. In fact, by taking risks, MSC has managed to set the stage for local companies and manufacturers to grow in step with foreign firms and increase their capabilities. In this period, highly sensitive equipment was produced in Iran to complete the steel supply chain. We take pride in making such big achievements.
We are proud to tell foreign manufacturing firms that we are satisfied with the indigenized goods in our country, because in some cases the locally made equipment functions better than foreign-made equipment.
Q. Anything to add as one final note?
A. The bravery of Iranian firms to get involved in indigenization and domestic production together with the measures MSC has taken to that end is praiseworthy. MSC’s members of staff and Iranian manufacturing companies take pride in the tireless efforts they have made to upgrade the country’s technical knowhow and complete the steel industry’s supply chain.
 
      
 


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