After over eight months of the year named after “Production, Support, and liberalization”, we would unfortunately have to admit that not only has no improvement been in made in the support and liberalization of production, but also new and unexpected barriers have emerged in this sector. These barriers are not specific to one industry and have affected a wide range of industries.
The steel industry is linked with many field of operation due to its dependence on mines (to supply iron ores), successor industries (to supply raw materials and sponge iron), and international economy (to supply imported raw materials). ). Poor planning and negligence toward the associated attachments can definitely cause an extreme damage to this industry an industry that has managed to compensate for the reduced oil sales to some extent and bring an acceptable amount of currency to the country despite its many limitations during the sanctions).
Power shortage was among the essential problems of this industry this year. Considering that oil and power are critical resources for rolling and smelting units, their shortage and difficulty of supply can lead factories to shut down. Meanwhile, the 2025 Vision Document has predicted the production of 55 million tons of steel and achievement of the seventh rank worldwide in this regard, while the current challenges and production difficulties have led to steel industry to retreat from the vision horizons.
The new government is expected to compile long-term plans and address the challenges ahead through the approach of attention to the influential industries and special regards for the position of the steel industry as a parent industry that takes up a large portion of the employment in the country and has many connections to predecessor and successor industries.
. Economic actors are undoubtedly responsible for having the necessary cooperation in resolving national crises given their social responsibility and overlook their profit for the good of the community in some cases. However, this will only materialize when these industries can managed to stay in business and have acceptable justifications for their continued activity.
Unplanned and unpredicted power failure have imposed great financial burdens on the steel industry given that planning in the steel industry takes at least six months.
. Power is one of the main resources in the steel industry whose shortage or failure leads the production line to halt completely. . The 10% activity limitation for steel production would mean that smelting and rolling furnaces have to be shirt down. It must be noted that a minimum of 60% capacity is required for smelting and casting production, , and the industry would otherwise be practically unprofitable which has already led to the closure of several factories.
. One should note that there is no way around paying adequate attention to industries to achieve the macro-level economic plans. The Supreme Leader’s choice of motto of the year indicates his conscious and delicate attention to the aforementioned. The industry cannot carry the burden of deficiencies alone. Prioritizing industries as a means to make up for power shortages would be huge blow to the economy of the country.
. There have recently been rumors of cutting and limiting the consumption of oil in the steel industry , in which case a substantial portion of factories will go bankrupt and leave the steel industry since no subsidies would be granted to the producers despite the many limitations imposed on them.
Despite the power shortage, the significantly reduced steel production, and the subsequent decline in respective revenues this year, not only did the associated institutions and offices lend no helping hand to the industry, but the power company also redoubled the restrictions and sought to collect its claim although the installments had to at least be postponed given the emergency circumstances that had arisen. However, the stricture of the government organizations and banks increased in the present year, which made installment payment practically unbearable for many factories given their losses.
. It must be noted that the 55million-ton steel production is currently unfeasible given the present capacity of the factories. Achieving this level of production would need new investors to be added to this industry, whereas even those currently operating in the industry are unfortunately reducing their production leaving the industry due to the recent challenges. . Hopefully, the government can adopt a supportive approach, follow the motto of the year, cease any further restrictions such as gas consumption limitations, and develop operational plans to resolve the obstacles ahead.
The amount of the profits lost due to the decline in steel production as a result of power shortage has been estimated to be millions of dollars, which is by far higher than the costs of establishing and operating new power plants
The new government would be expected to adopt a professional and long-term approach to this issue and allocate facilities to new power plant establishment so that the private sector would find it feasible to enter this field, sustainable power supply for industries can be insured over the next couple of years, and similar crises can be prevented.
The mandatory prices in the market are among the other challenges of the steel industry. Transparency and setting competitive prices for steel would definitely be well-received by producers besides their national advantages.
Setting prices based on supply and demand is an important economic principle. There is no criticism in this regard, but the important question is how much the obligation to supply goods on the stock exchange by the actors of this field and obliging them to sell and purchase in the stock exchange or export their goods have managed to help the producers and end-consumers?
One could only assume that transparency has been achieved and the market has found its way if the prices are not mandatory and are rather determined through supply and demand; however, we are currently witnessing an intervention in the market trends.
The base prices of ingots and longer sections such as beams and rebar are set mandatorily. Meanwhile, the sales prices are calculated based on the half-dollar rate while the producer purchases the raw materials they need with free currency.This type of pricing would not be realistic and could only be accepted if the currency was not multi-priced in the country and the prices of inputs such as power and gas were constant; however, the prices of energy carriers have gone through a six-fold increase over the past five months.
The aforementioned plus the high prices of steel production based on the mandatory sales prices deal significant damage to factories which would be a great challenge for the manufacturers.
The steel industry has been among the currency-making industries of the country over the past couple of years, and its manufacturers have always carried out their currency duties without any complications. The main issue would be to consider all aspects, which are unfortunately absent from the decision-making and planning. . The multi-priced rates of currency and the taste-oriented behavior in calculations have led the final price of the products to be set lower than their real prices.
The aforementioned place heavy pressure on the manufacturers and force them to reduce production. . It must be noted that the shortage of supply in the market and the high demands for the product will lead to a sudden jump in prices which would be unpleasant for both the consumers and the manufacturers. The consumers and manufacturers should both be supported harmonically.
Focusing on supporting the consumers only and reducing the prices with no regard for manufacturing costs may prove responsive over the short term, but will cause significant damage to manufacturers over the long term. Notably, the losses of manufacturers and their exit from the market will eventually harm the consumers. Meanwhile, rushed and short-term decisions and transient improvements can lead to irreparable damages in the future which would be contradictory to the wisdom shared by the Supreme Leader and the motto of the year.
Expensive raw materials, cheap final products, and extreme pressures imposed on the manufacturers have challenged the market, and the sanctions have interrupted imports so that steel products cannot be easily imported.
Pursuing the current management approaches would fail the steel industry in even responding to the domestic needs which will become a new economic complication at the national level.
The steel industry if Iran has managed to find itself a suitable position among other countries and follow a growing trend in upstream and middle industries of the steel chain over the recent years through great expenditure. Hopefully, we can use this opportunity and take advantage of comprehensive and holistic plans that are strictly economic and regardless of the changes in government or political developments to achieve the predicted goals.
This goal can be accomplished considering the potential available in the country, and all forces must cooperate to achieve it. . We would then see increasing improvements, God willing.
