New market study, "Iran Metals Report Q1 2011", has been published

Jan. 2, 2011 - PRLog -- The Iranian steel and aluminium industries reported better than expected growth in 2010, assisted by new capacity coming online and the weakening of the rial in H2, but targets for 2011 and beyond will be undermined by international sanctions and overcapacity in China, according to this latest Iran Metals Report from BMI.

Based on Iranian government figures and the World Steel Association, we estimate that Iranian crude steel output will grow 9.5% to 11.9mn tonnes in 2010, 1mn tonnes above BMI's prior forecast. Growth was encouraged, in part, by the weakening of the rial in H210, a trend that boosted domestic metals producers who had witnessed declines in orders and output in Q2. The central bank had attempted to shore up the currency, but there has been a rush towards hard currency amid stricter economic sanctions.

Output in 2010 has been supported by capacity additions, particularly in value-added segments such as automotive-grade sheet steel and stainless steel. New steel mills include the Hormozgan Steel plant, the commissioning of which was put on hold due to delays in imports of equipment. The Hormozgan Steel mill has a capacity of 1.5mn tonnes per annum (tpa) of slab and should have come online by end-2010. The long-term goal is to make the zone a national hub of steel and aluminium production with capacities of 10mn tpa of steel and 500,000 tpa of aluminium. In November 2010, Iran opened the Middle East's largest galvanised steel mill, which is jointly owned by the Saypa Company, Iran Khodro Company and Steel Industry Pensioners' Support Fund. The mill, located in Chahar Mahal Bakhtiari province, has production capacity of 400,000 tpa galvanised flat steel for the local automotive industry.

The targets of 14mn tonnes of crude steel output and 20mn tpa of capacity in the current Iranian year, ending 20 March 2011, look out of reach, even given the better than expected figures from August 2010. Even in the absence of new sanctions, the financing, expertise and infrastructure would not be sufficient to achieve the aspirations of the steel industry, with some projects set to see lengthy delays. However, low rates of growth do not bode well for new capacity due to come onstream in the months and years ahead with the prospect of low capacity utilisation and high levels of inventories. According to IMIDRO, the National Iranian Steel Company is planning to open eight new steel works in 2011-13 with combined capacity of 8mn tpa and the government has targeted steel production of 20mn tonnes by 2014. BMI does not believe that, under current conditions, it will take until 2015 at the earliest to reach this target.

Sanctions will cut into output growth and limit production activity, with BMI forecasting 2015 exports of semi-finished and finished steel products totaling 1.55mn tonnes in 2015, up over 140% compared with 2009 and representing just over 10% of domestic output. Iran's trade with Asia in semi-finished and finished products is unlikely to be immediately affected by the tougher UN sanctions regime relating to the country's nuclear programme and further sanctions by the US and EU, although it is likely to be impacted by over-capacity in China. However, increased political risk associated with sanctions will dampen future capacity growth in the sector, since Iran will find it more difficult to secure partners and financial backing for any project. Even without the sanctions regime, the investment climate is challenging due in large part to the regulatory processes and restrictions.

In the aluminium sector, production reached just under 342,300 tonnes in 2009/10, representing growth of 13% y-o-y. The value of aluminium exports reached US$258mn. International sanctions will affect aluminium producers more than steelmakers with their impact already being seen on aluminium consumers. Inconsistent pricing with lower prices on the London Metals Exchange (LME) has simply complicated the situation, with aluminium consumers bypassing local traders and sourcing raw material from foreign markets. At the same time, the energy needs of smelting operations require an increase in electricity generation and aluminium producers are keen to see the establishment of large-scale nuclear power stations, mindful that the country's oil, gas and hydroelectric potential will not be enough. The US's opposition to Iran's nuclear programme therefore poses a major obstacle to the development of Iran's aluminium industry. The inauguration of the 147,000 tpa Hormozal smelter in Hormozgan in late 2010 will boost primary aluminium production in 2011, although we are not confident that the plant will produce at full operating rates.

For more information or to purchase this report, go to:
-  http://www.fastmr.com/prod/106426_iran_metals_report_q1_2...

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.