Iran seen years away from steel self-sufficiency

London: China, Russia and Kazakhstan are among the few trade allies still providing a lifeline to Iran’s vital steel and iron ore sector after most Western suppliers and buyers have cut ties due to growing sanctions pressure.

While industry data shows steel imports have more than halved in the last year, Tehran has kept an inflow from some partners and slightly boosted domestic production of the material, used in construction and vehicle production but also potentially for nuclear use and munitions.

Iran has also doubled exports of the steelmaking raw ingredient iron ore, worth about $3 billion (Dh11 billion) a year at current prices. The country does not have enough capacity to use much more of its ore to produce steel, but exporting it provides much-needed income now its oil revenues are down by about 50 per cent due to sanctions over its disputed nuclear programme.

“This only allows Iran to ease the pain or offset some of the effects of what is happening because of sanctions. It does not enable them to overcome the sanctions,” said Scott Lucas, founder of the EA WorldView news site.

“The Iranians are having to go to a shrinking number of customers to try and look for this increase in exports like iron ore to compensate for sharp drops in its main product, which is oil,” said Lucas, whose site provides analysis on Iran.

While EU and US bans on specific ferrous products have pushed most Western players away, fearing repercussions on their international trade, Chinese interest in Iranian iron ore has increased, and China has increased steel supplies to Iran.

Top steel producer China is now buying about two million tonnes of Iranian iron ore a month, double the amount it was buying in early 2012, data from consultancy the International Steel Statistics Bureau shows.

“The growth in exports is absolutely true ... [The business] is growing from an infant to a small child,” said a spokesman for the Iran Iron Ore association.