Page 24 - Buy Russia - bne IntelliNews monthly magazine April 2017

24 I Companies & Markets bne April 2017
Spooked
Iran’s main steel export destinations in Europe include Italy, Spain and Belgium and the sheer extent in the growth of ship- ments has Eurofer spooked. It’s not taking any chances.
Eurofer spokesman Charles de Lusignan told bne IntelliNews: “Exports from Iran have risen from around 140,000 tonnes in 2013 to over 1.1 mn in 2016. This is a significant rise and well outstrips the modest degree of growth in the EU market. The sharp rise in exports is already under the microscope in the EU, not just [in terms of what’s coming] from Iran but from other trade partners. The EU is, for instance, investigating alleged dumping of hot-rolled steel by producers in Iran as well as in Serbia, Brazil, Russia and Ukraine.”
A European Commission source confirmed reports that, following the investigations, the EC has until April to decide whether to impose anti-dumping duties on the countries for six months. It also has 15 months to consider whether to apply “definitive” levies for a period of five years.
“In comparison, steelmakers in a number of countries, including China, are now falling stars”
Iran, in the meantime, is preparing to fight its case, having hired an attorney to fight dumping allegations, according to a February 23 report in the Financial Tribune. The article quoted Deputy Minister of Industry, Mining and Trade Mehdi Karba- sian as saying: “We dismiss all allegations of dumping. There is no evidence to prove this claim.”
For now, individual European steel producers seem anxious not to offend their Iranian counterparts. After Wolfgang Eder, CEO of Austria-based Voestalpine, told Reuters on Febru-
ary 16 that a "European commodity steel business won't be sustainable in the long term unless the external parameters [such as anti-dumping duties or capacity reductions] change" his company’s press office quickly pointed out that their boss was not referring directly to Iranian exports but to the general situation.
But should some of the more optimistic predictions about the potential prowess of Iran steel manufacturing come true such restraint might soon dissolve. For a sample of such outlooks, visit the website of Iran’s Mobarakeh Steel, the largest steel producer in the Middle East, which has around
a 60% market share for Iranian steel sheet deliveries.
It carries extracts from an April 2016 World Steel Dynamics report issued by renowned global steel industry analyst
Peter F. Marcus. Describing the Iranian steel industry as
a “rising star” for the next decade, he added: “In comparison, steelmakers in a number of countries, including China, are now falling stars.”
www.bne.eu
However, Marcus also highlights some difficulties ahead:
“The Iranian steel industry is facing an array of challenges
in the next decade, including a) a severe shortage of capital since the central government is not providing direct financial help;... b) capital from domestic sources is extremely expen- sive;... c) the risk that the Iranian currency, the rial, appreci- ates sharply in the next decade (World Steel Dynamic’s view), which will boost the Iranian steel mills' costs on a US dollar basis; d) far from adequate low cost iron ore reserves;... e) the lack of a sufficient countrywide rail transportation system; and f) poor labour productivity.
“Nevertheless,” added Marcus, “granted that economic sanc- tions are not re-imposed on the economy by foreign countries, the Iranian steel industry's risks and problems seem to be less than those faced by steelmakers in most other countries. The opportunities for a prosperous industry are good given the highly favourable steel demand outlook, the access to low-cost energy in the form of natural gas and the price charged for electricity, the fairly low-cost iron ore mines in the country, the good location to export, attractive capacity expansions via the DRI/EAF [direct-reduced iron/electric arc furnace] route and a government that will be sufficiently supportive of the industry (including the imposition of trade barriers against foreign steel mills when needed).”
Fancying its chances
Also fancying post-sanctions Iran’s world steel market chanc- es was Steel Times International in a February 2016 feature entitled “All systems go for steel in Iran”. The article details some of the great amount of welcome new business that has been opened up in the Islamic Republic for European provid- ers of steel production technology – Italy’s Danieli Group, for instance, had just signed agreements worth around €5.7bn for equipment that can, for example, speed up casting – and explains why Iran’s abundance of cheap gas is so important in steel manufacturing, noting: “Iran’s ability to capitalise
on gas-based DRI as part of its raw material mix due to the abundance of natural gas in the region is an important factor to consider.”
Apart from the estimate that the Iranian mining and steel sectors require $50bn in foreign investment to develop at the demanded rates, two other challenges faced by those pursuing the 2025 steel production target include instances where there is a lack of timely access to modern production technologies and potential shortages of iron ore.
The first roadblock may be partially overcome by the govern- ment’s exempting of imports of steel production equipment from duties and permitting of imports of second-hand machin- ery less than 10 years-old. The second could be negotiated by the government slapping duties on the export of unprocessed iron ore (as India has done), making cheap feedstock pro- curement simpler for domestic steelmakers. But such a move would again raise the hackles of Eurofer. It represents Euro- pean producers that have to import their ore and says such a move would be tantamount to protectionism.