Iran Metals Report Q1 2013

BMI's latest Iran metals report examines how the Iranian steel industry is able to grow amid a punitiveinternational sanctions regime and a domestic economic crisis. It also details the latest projectdevelopments as the country seeks to increase its steel capacity from 20mn tonnes per annum (mntpa) to55mntpa by 2025, as well as a tripling of aluminium smelter capacity to 1.5mntpa.

While a cut in external trade has impacted negatively on the steel industry, isolation has also ensured thatimports have also been restricted. However, domestic industrial deficiencies in certain market segmentsmean that Iran will struggle to meet its own needs in spite of declining consumption. Crude steel outputrose 10.6% year-on-year (y-o-y) to 12.05mn tonnes in the first 10 months of 2012, representing one of thestrongest growth rates in the world, rivalling Turkey.

Nevertheless, due to infrastructural problems as well as a lack of billet and rebar capacity, the country isstill dependent on imports to serve the market, mostly from Turkey. Meanwhile, growth in themanufacturing of steel products has slowed markedly, with existing crude steel capacities were unable tosupply sufficient supply to downstream industries and therefore exacerbating the dependence on importedsupplies. Weak points remain, with flats demand coming under pressure as automotive output suffersfrom declining domestic demand. Over the medium term, Iran will be reliant on exports at a time when itis becoming harder to sell on external markets.

Iranian trade has been affected by international sanctions, with the country having to manoeuvrestrategically to meet domestic demand and maintain the robust production growth seen a few years ago.Iranian steel production grew by 10.0% and 8.7% in 2010 and 2011, although BMI forecasts this slowingover our forecast period to 2017.