Large Drop In Iran’s Steel Production Blamed On Russia

Iran's crude steel production declined dramatically for the second month in a row, according to a new report by the World Steel Association on June 22.

The report says Iran's steel production declined 17.6% year-on-year in May to 2.3 million tons.

In April also, the figure plunged 20.7 percent to 2.2 million tons, according to this report.

Iran is the 10th largest steel producer in the world just behind Brazil. China is the undisputed producer with close to 100 million tons of monthly output. Production of all the top ten suppliers declined in the first 5 months of 2022, except India that had an increase of 6.5 percent. But Iran had the highest drop. An 8.7 percent reduction in China could be due to strict Covid lockdowns.

Production loss in Iran, however, was not related to the pandemic. There were no lockdowns in 2022, as cases dropped dramatically after a vaccination drive. Iran's Shargh daily newspaper quoted Iranian steel industry officials in mid-May as saying that Russia was pushing Iran's steel exports lower by dumping its products in Asia after losing its Western markets due to sanctions after its invasion of Ukraine.

Reza Shahrestani, a member of the Board of Directors of Iran Steel Producers Association told Shargh Daily that Russia is dumping its steel products by giving 15 to 20% discount: Iran's traditional markets including China, South Korea, Taiwan and Afghanistan are buying Russian steel now.

At the same time, Tejaratnews Daily reported that Iran's direct reduced iron (DRI) export plunged to zero in the first month of the current fiscal year (March 20-April 21).

After the media raised concerns, Omid Ghalibaf the spokesman of Iran's Ministry of Industry, Trade and Mines claimed that the country's steel exports increased by 10% during first two months of the current fiscal year (March 20-May 21) to 1.06 million tons.

However, this figure and the growth in steel exports claimed by the spokesman are questionable because Iran usually exports above 33% of its steel output to international markets. The country produced 4.5 million tons of steel during the period mentioned by Ghalibaf's. Therefore, Iran should have exported at least 1.5 million tons of steel, not 1.06 million tons.

The decline in Iran’s crude steel production in April and May impacted its overall number for 2022. While its production level was normal until end of March, the reduction in that month turned its balance sheet negative for 2022. It produced 11.4 million tons of raw steel in January-May 2022, about 10.8% less than the same period of 2021.

Amid United States' sanctions on Iran's oil exports, steel is one of the main exports earning foreign currency for the governmetn, which faces a serious financial crunch. A report this week revealed above 50-percent inflation for Mya-June compared to the same perios last year, with food prices jumping more than 80 percent.