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U.S. Renews Economic Sanctions Against Iran And Cracks On Iranian Steel Capacity Expansion Project

- May 11, 2018 -

U.S. Renews Economic Sanctions Against Iran and Cracks on Iranian Steel Capacity Expansion Project

U.S. President Trump announced on Tuesday that the U.S. government will implement "the highest level of economic sanctions" against Iran. Once the United States withdraws from the Iranian nuclear agreement in 2015, it will significantly slow Iran’s expansion of its steel production capacity, and its impact on steel and iron ore exports will be relatively limited.

Since 2015, Iran has been working hard to promote the development of the national steel industry. The project plans to increase Iran’s steel production capacity from the current 32 million tons per year to 55 million tons per year in 2025, almost doubling its capacity.

It is expected that the financing difficulties brought about by the United States’ resumption of economic sanctions against Iran will severely crack down on new steel plant projects or ongoing steel projects. Sources said that due to the uncertainty of U.S. policy, many steel-related projects have come to a standstill. For these projects, financing has always been a big problem because they are only allowed to cooperate with banks that have no relationship with the United States.

If Iran cannot cooperate with European metallurgical equipment manufacturers, it is expected that Iran will shift more to China to seek the technical equipment required for steel and metal development projects.

As Iranian steel production growth is higher than domestic steel market demand growth, Iran has become an important steel exporter in recent years. According to the Iranian Steel Manufacturers Association (ISPA) this week, total exports of steel and DRI exceeded the historical record of 9 million metric tons for the fiscal year ending March 20, 2018. Of this total export volume, billet exports including billets and slabs accounted for 6.87 million metric tons, an increase of 84% year-on-year.

The Iran Steel Manufacturers Association stated that Iran intends to increase its total exports of steel and DRI to 120-1300 million metric tons during the current Iranian fiscal year ending March 20, 2019. Iran also plans to increase its crude steel production this fiscal year from 21 million tons last year to 26 million tons.

Trade sources said that Iranian exporters generally do not use letters of credit, and that their export trade is conducted through traders that have no relationship with the United States. Therefore, after the restart of economic sanctions by the United States, Iran’s export trade will not be affected too much. Great influence. Since the Iranian currency Rial devaluated by 50% last year, Iran’s steel exports have become very competitive.

As Iran needs to produce more iron ore to meet the growing domestic demand for steel production, Iran’s iron ore exports have declined in recent years. As of March 20 this year, Iranian iron ore exports have been reduced from the peak of 25 million metric tons per year a few years ago to 18 million metric tons. In addition, because almost all of Iran’s export iron ore is destined for China, the export of ore in the short term will not be directly affected by the resumption of economic sanctions by the United States.