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Iran Metals Report Q1 2010
Business Monitor International, Dec 2009, Pages: 52
Iran Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Iran's metals industry.
According to the World Steel Organisation (WSA), Iran’s crude steel output is expected to increase 5.1% in 2009. BMI’s forecasts are slightly more optimistic and we expect steel production to grow by 8% in volume terms in the year to 10.7mn tonnes, making it one of the largest producers in the Middle East and Africa (MEA) region. However, after posting strong growth in 2009, we expect steel output to expand by just 3.3% in 2010, below the WSA’s forecasts of nearly 8% growth. BMI’s projections are based on our view that economic recovery will only be modest in 2010, with GDP growth standing at 1.6%. Oil prices may have been trending up for the whole of this Iranian year (so far), but turning the economy around will take some time. For example, in the second half of FY2008/09, investment in new manufacturing units was down 48.4% y-o-y in nominal terms. Meanwhile, in Q408 and Q109, new private sector investment into building construction was down 25.6% and 8.7% quarter-on-quarter (q-o-q) in nominal terms respectively (though it was still up in y-o-y terms in both of these quarters), directly affecting steel consumption. This slowdown in industrial and construction activity will weigh on steel demand over the short term. However, over the longer term BMI still believes that Iranian steel output will increase dramatically.
In September 2009, the Iranian Mines and Mining Industries Development and Renovation Organisation (Imidro) announced that it was planning 43 major projects in Iran worth a total of US$26bn. Of these, 16 are related to steel, 11 to copper and 3 for aluminium. The remaining projects are for infrastructure and mining. One of these major metals projects, the 1.5mn tpa (tonnes per annum) steel capacity expansion at the Hormozgan steel plant, is due to come onstream in the next few months. Meanwhile, in October 2009, Iran opened the US$2bn Hormozal aluminium smelter, which will reportedly increase the country’s aluminium capacity by 47% to 457,000 tonnes per year. On the back of this, Iran has now reached an agreement with the China Nonferrous Metal Industries Foreign Engineering and Construction Company (NFC) to build an aluminium plant with a capacity of 276,000 tonnes in the Iranian city of Lamard.
From a small base, the Iranian aluminium sector is developing rapidly. According to Imidro, aluminium exports reached US$125mn for the first half of the Iranian year, totalling 87,693 tonnes. This represents an increase of 18% year-on-year (y-o-y), while aluminium production has increased by 22% to 143,622 tonnes. Iranian aluminium companies Iralco and Almahdi produced 86,544 and 57,078 tonnes of aluminium respectively in the period.
However, news in the steel sector was not so positive. In November 2009, India’s National Aluminium Company (NALCO) announced that it will be postponing a planned US$1.6bn 300,000 tonne aluminium smelter and power station project. The project has stalled due to problems finding financing as well as political considerations. Despite approaching several banks, Nalco is still in need of US$1bn in funding according to The Economic Times.
Meanwhile, Nalco believes that the Iranian government has not shown enough support for the project. According to Finance Director B.L. Bagra, speaking to Dow Jones, ‘They (the Iranian government) should have jumped at this opportunity, but they haven’t.’ However, the deal is not entirely dead and NALCO is still reportedly considering a major investment programme in the country.
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