LONDON, June 1, 2018 /PRNewswire/ --
On May 8th, 2018, the USA announced its withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA, better known as Iran Deal).
This deal, meant to ease economic sanctions on Iran in exchange for restrictions and monitoring of the country's nuclear programme, was entered between P5+1 nations (China, France, Germany, Russia, the United Kingdom and the USA), the European Union and Iran. Withdrawal of the USA from this deal means that they will re-impose secondary sanctions on Iran in a phased manner starting August 6th, 2018, thereby exposing any businesses with an American affiliation or ownership interest undertaking a deal with Iran to enforcement actions. More importantly, these sanctions will restrict access of Iranian businesses (or people dealing with Iran) to the US financial system.
Re-imposition of economic sanctions by the USA are likely to have major repercussions on the country's steel industry. In particular, it will impact on Iran's booming international steel trade, even though there are certain trade arrangements in place without US links. In this insight, CRU assesses the potential impact of this development on Iranian steel trade and the country's ongoing steel capacity expansion plan (which aims to increase the country's crude steel capacity to 55 Mt/ y from current capacity of 32 Mt /y).
Iranian steel industry performance – post the Iran Deal
As soon as the historic Iran Deal was struck between world powers and Iran, the country pushed forward with a Comprehensive Steel Plan; which aimed at increasing the country's crude steel production capacity to 55 Mt by 2025. Investments in this plan were spearheaded by state-owned steelmaker Mobarakeh Steel Company (MSC) and Iranian Mines & Mining Industries Development & Renovation Organisation (IMIDRO). Both these organisations formed joint partnerships with various public/private sector players to invest in the steel value chain, ranging from DRI production to downstream steel products.
Although foreign investment remained limited, except for a few Chinese investors, the plan translated into sharp growth in the country's crude steel production. Between 2014 and2017, Iranian crude steel production saw an impressive CAGR of 9.1% (see chart), making Iran the world's 13th largest steel producer in 2017 with an output of over 21 Mt. Looking at March 2018 data alone, Iran was the world's 10th largest crude steel producer.
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