Iran Economy NewsIran thaw seen re-stoking $6 billion market for steel

Iran thaw seen re-stoking $6 billion market for steel

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Bloomberg: Even after seven years of international sanctions and the economic pain they’ve inflicted, the Islamic Republic still consumes more steel than France or the U.K. It’s a major carmaker and needs massive infrastructure for its oil and gas industry.

Bloomberg

By Thomas Biesheuvel and Ladane Nasseri 

Global steelmakers have Iran in their sights.

Even after seven years of international sanctions and the economic pain they’ve inflicted, the Islamic Republic still consumes more steel than France or the U.K. It’s a major carmaker and needs massive infrastructure for its oil and gas industry, consuming about 20 million tons a year of the metal, most of it homemade.

As economic sanctions eased last month under a temporary accord, Iran is shaping up as a hot, untapped opportunity for Western steel exporters, particularly high-grade varieties. ArcelorMittal (MT) and Russia’s OAO Novolipetsk Steel have mills in central Asia that supplied Iran before sanctions in 2007, when it imported 12.2 million tons a year of the metal, valued at $6 billion today. Other steelmakers are quietly testing the waters.

“We feel the interest,” Mehdi Karbasian, Iran’s deputy minister of Industry, Mines and Commerce, said in an interview. “We witnessed it in private meetings we’ve had.”

About 45 producers sent representatives to a steel conference last month in Tehran to study export opportunities and investing in Iran’s domestic industry, Karbasian said. More than 10 steelmakers contacted by Bloomberg declined to comment or said they hadn’t attended the event.

Some of the restrictions imposed by the U.S. and European Union on Iran in recent years were lifted last month under a Nov. 24 interim pact between Tehran and six world powers. Talks are under way to turn that into a wider, long-term agreement.

Currently, companies supplying certain products including steel still risk punishment from the U.S., which has attempted to isolate the Islamic nation over its nuclear development. China never stopped exporting to Iran and sold 276,000 tons of steel to the country last year.

Political Thaw

Since taking office in August, Iranian President Hassan Rouhani has lessened the political isolation the country endured under his predecessor. He has spoken by phone to Barack Obama and made concessions as he seeks a long-term deal that requires Iran to prove its atomic program is purely civilian.

Outside of steel, business executives and trade groups from France, Italy and Turkey have visited Iran in the prospect of renewing business. Total SA Chief Executive Officer Christophe de Margerie was among business leaders wooed by Rouhani in January at Davos in Switzerland during the World Economic Forum.

ArcelorMittal, the world’s biggest steelmaker, may be in one of the best positions to benefit from any easing of sanctions by shipping from its plants to the north in Kazakhstan. Russian producers including Novolipetsk say geographical and infrastructure links with Iran will create opportunities for them too.

Kazakhstan Connection

“There is a softening of the stance” against Iran by foreign powers, Aditya Mittal, chief financial officer of Luxembourg-based ArcelorMittal told investors last month. “Kazakhstan used to sell a lot to Iran and we are hearing the Iranian market is opening up.”

Mittal told investors the company was “reviewing” the Iran situation. The steelmaker, whose Kazakhstan unit sold more than 1 million tons a year to Iran before sanctions were tightened in 2012, said it no longer does so in compliance with those restrictions, when asked by Bloomberg about its plans.

Iran saw imports fall by more than half since 2007 in the face of biting sanctions from the West that have crippled the nation’s $500 billion economy. The International Monetary Fund estimates the economy shrank in both of the past two years. While oil output rose last month, it’s still near a 25-year low.

Russian, German Producers

The country has become more self-reliant. Domestic steel production grew 6.5 percent to 15.4 million tons last year, more than double the global growth rate of 2.4 percent, according to the World Steel Association.

OAO Magnitogorsk Iron & Steel has been Russia’s biggest exporter to Iran, selling about 1.6 million tons of steel in 2011, according to Kirill Chuyko, head of equity research at BCS Financial Group in Moscow.

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Spokesmen for Novolipetsk and Magnitogorsk declined to comment.

Danieli SpA of Italy and Germany’s SMS Siemag gave addresses at the steel event in Tehran, Karbasian said.

A person familiar with Danieli’s situation said the company attended the conference, as the Iranian market is interesting and Danieli is evaluating possible opportunities there. 

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