All throughout history, steel has been a well-known product and the most consumed metal. Although less known today as an art, metal work is one of the most ancient achievements of human being and has been turned into a large industry that runs the wheels of many other industries. The steel industry has abided by the global economy and its improvement is an appropriate indicator of economic improvement of a region. During the past 15 years, this industry has grown dramatically, mainly due to its growth in countries such as Brazil, Russia, India and especially China (BRIC countries). Since 2001, this industry has simultaneously faced dramatic prosperity and recession, which have led to an average growth rate of 6% in production and 5.5% in consumption. Like any other industry, growth of this industry faced many challenges in the wake of the 2008 financial crisis and despite improvement of steel industries after the crisis, the recent debt crisis of euro-zone governments has created a relatively high uncertainty in this market.
The idea of MITSK Group was raised when the world, after acquaintance with BRIC countries, needed more newfound countries to pitch in to secure the global economic growth. This time the countries of Malaysia, Indonesia, Turkey and South Korea had to make preparations for the growth and development of the economy, however their efforts were not that successful. While the emerging markets are growing, their performance is remarkably different. Some developed markets had a better-than-expected performance; while the remaining markets were either making efforts to keep going or put on a downward performance. Due to the entry of the steel-producing companies which are related to the developed countries through joint venture with developing countries, steel producers in the emerging markets are expecting the competition to increase to its highest level. Steel manufacturers believe that the market instability has been mainly caused by the finished cost of the raw materials and the situation has worsened with change of annual contracts to shorter-term ones
Shortage of supply has left iron ore and coal dealers no choice but to reschedule their pricing mechanisms. This has entailed challenges for steel manufacturers and currently they are not only faced with increasing instability in prices of raw materials, but also they are forced to maintain marginal profit with regard to fluctuating demands; an aspect that has significantly affected revenues of the steel industry.
The world today, has a steel production of nearly 1650 million tons. China, with a production rate of approximately 815 million tons, is holding in hand almost 50% of the world steel production, which compared to the previous year, shows about 2 percent growth. The growth rate of China’s steel production, like that of the rest of the world, is on the decline. So it can be said that the decline in global growth rate originates from the declining trend in China.
Last year, China’s steel consumption was about 710 million tons, which compared to its preceding year, had a growth of 2.5%. The country’s steel exports amount to over 90 million tons. Based on the reviews and forecasts made by experts, China is to see its steel consumption peak in 2016 and the overflow of its steel to the world will create tension in the market and in some cases would even intensify occurrence of dumping. Therefore, China is the largest producer and consumer of this market and its policies will have a great impact on the steel industry. Through its recent measures, China has tried to reduce the finished cost, increase competitive power and improve marginal profits of its steel manufacturers. Among measures taken by China in its 5-year plan was the order for the merger of steel companies to reach the highest possible capacity. While reducing joint costs, this merger would increase the bargaining power (of producers) against suppliers including iron ore dealers. Among other plans China has mention can be made of the following:
• Reducing the price of maritime freight, especially in stone supply from Brazil and Australia;
• Expanding exploration projects in central and western parts of China in order to reduce dependence on maritime transportation of iron ore;
• Lowering the cost of goods transfer
China’s measures and its reduction of steel consumption had an immediate impact on iron ore price plunging it to the lowest level in the past few years.
The structure of the steel industry has slightly changed during the past century due to the transfer of state ownership to private ownership. Within the past few decades, steel plants had higher marginal profits as they had both the bargaining power with the raw materials suppliers and (they themselves) determined the market price for steel distributors and customers. However, since 2011, the pricing power has remained mainly in the hands of raw materials suppliers and steel customers. Steel manufacturing has turned into a kind of processing raw materials and is no more considered the exclusive value creating factor.
Steel manufacturers should adjust their business models with these changes so that the risk of raw materials prices would be directly shifted to consumers and the risk of fluctuations in market demands would go to raw materials suppliers. Companies that ignore facilitating policies like productivity expansion and lowering finished costs are doomed. Meanwhile, it should be noted that lack of operational speed has affected the industry and resulted in creation of surplus capacity at current levels so that approximately 23% of the world steel capacity is vacant.
Steel manufacturers with an aim of changing their trade models have considered more flexibility in operations, increased raw materials production ownership, created higher added value through development of downstream industries, introduced more consumer-friendly approaches, alloying as well as innovation policies in and proper pricing of their products.
Manufacturers will be faced with huge challenges both from environmental point of view and lowering energy consumption as part of production cost.
Controlling the amount of greenhouse gases emission per ton steel, along with the energy supply cost are among the issues the steel industry has to face. The structure of European energy demand for the steel production is in accordance with the following figure based on production forecasts.
Steel Industry in Iran
The art of steel manufacturing in Iran has such a long history. Many Western researchers, historians and oriental scholars have identified Miyan Roudan (Mesopotamia) as a location in which steel, as an art and industry, was originated. There is no doubt today that many man-made crafts and techniques have their roots derived from this region. Based on the existing evidence, roots of this art and industry in Iran date back to 7000 years ago in the fifth millennium B.C. References have also been made to regions such as Neyriz in Fars, Gol Gohar in Kerman, Mesopotamia, etc.

In Iran, the first step towards gaining access to this industry was taken in 1338 (March 21, 1959- March 20, 1960) with the formation of the National Iranian Steel Mill. In 1351 (1972-1973), the National Iranian Steel Industries Company was founded and the first steel manufacturing plant, that is Isfahan Steel Company (Zob Ahan-e Isfahan) was created.
In the aftermath of the victory of the 1979 Islamic Revolution in Iran, the National Iranian Steel Company was established in 1358 (1979-1980) with the merger of the National Iranian Steel Mill and the National Iranian Steel Industries Company, which was the sole company in charge of steel in the country until 1381 (2002-2003). Later, the responsibility of the steel management was delivered to the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO). The organization is currently in charge of implementing major plans with the goal of steel development such as seven provincial projects through its executive arm known as the National Iranian Steel Company. Many believe that in the absence of oil, the pillars of Iran economy will be founded on steel and that’s why steel industry is a pioneering industry in Iran.
In order to fulfill this goal, we need to overcome the present obstacles and problems of the industry and the steel markets which can be done through formulation of a comprehensive steel plan by IMIDRO.
Due to possession of iron ore, energy carriers, consumer market, skilled and experienced academic workforce, rail link, access to water and commercial ports, etc. Iran enjoys relatively good advantages for the manufacture of steel in comparison with some industrial countries such as Germany, Japan, South Korea, and so on. Unlike Iran, the mentioned industrial states should supply their needed iron ore and energy for steel production through imports. Therefore, in the face of global changes in the price of iron ore, coal, oil and gas they are more vulnerable than Iran as far as steel industry is concerned.
According to a report released by the World Steel Association, Iran is one of the major manufacturers of steel products in the Middle East. Iran’s steel production capacity is 21 million tons per year. Last year its steel production amounted to 15.631 million tons, up by 9% compared with the corresponding period in its preceding year. Iran is also faced with a 25% vacant capacity in steel production, which can be filled through an increase in consumption market. Iran’s steel production by the end of 1350s (1970s) was approximately 575,000 tons per year. The figure reached 1.584 million tons at the end of 1360s (1980s) and amounted to 6.614 million tons at the end of 1370s (1990s). At the end of 1380s (2000s), Iran produced 12.719 million tons of steel annually and in 1392 (2013-2014) the volume increased to 15.631million tons.
Iran’s downstream steel industries are highly prone to development. Most of the steel production in Iran is related to the housing and construction sector as is most of consumption, too. Iran’s production capacity of steel products is more than 25 million tons per year and its production in the last year amounted to about 17 million tons. Prevalence of construction market in Iran, Afghanistan, Iraq, Pakistan, etc. on the one hand and ever-increasing development of oil industry in exploration, extraction and transportation of this strategic substance in the Middle East region on the other, have developed a highly suitable market for steel products. Besides, the development of auto manufacturing in Iran would definitely act as a substantial factor.
Iran plans to increase the capacity of its raw steel production to 60 million tons per year by the end of 2025. Currently a number of big international steel companies are concluding contracts with Iran with the aim of participating in steel development. Iran is fully ready to attract participants and investors from domestic and foreign companies in this sector. Future steel projects will be implemented alongside rich gas resources in the Persian Gulf and Gulf of Oman with the aim of increasing the country’s capacity to at least five million tons per year.
Some of the big steel producing companies in Iran are: Mobarakeh Steel Complex, Khuzestan Steel Company, Isfahan Steel Mill, Khorasan Steel, Yazd Steel Alloy, etc. Also some of the steel development plans include Isfahan Mobarakeh Steel Complex, Isfahan Steel Mill, Khorasan Steel, Persian Gulf Saba Steel, Chabahar Steel, and development plan of 10 million ton mega module steel unit in Bandar Abbas, etc.

Ali Bakhtiari Ghale, IMIDRO