Iranian government has mandated steel companies to sell at least 60pc of their annual production through Iran Mercantile Exchange (IME), according to local media reports. These restrictions are imposed to reduce exports and aid domestic downstream steel consumers to secure raw material.
The government mandate permits all ingots, rebar and I-beam producers to allocate 25pc of their remaining production for exports. A decision regarding the remaining 15pc output oscillates between allocation for long-term contracts and exports. A decision in this matter is expected in the coming weeks.
Steelmakers would also need to secure permission from the ministry of industry, mine and trade to export their products. Companies failing to comply with these regulations could face penal action.
The decision came as a surprise for Iranian steel producers who were looking to explore seaborne markets given the present demand disruption in the domestic steel demand. Steelmakers hint a decline in production volume as a result of this decision also seems likely and seek a revision of the government decision.
Iran’s annual steel ingot production is likely to increase by 3.2mn mt in the Iranian calendar year beginning on March 20, 2020; according to Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO). World Steel Association (WSA) data shows Iran’s crude steel production rose by 30pc in 2019 and the average global growth in the steel sector was at 3.5pc.
In early May 2019, the US government had imposed new sanctions on Iran’s metals and minerals sector which hampered exports. Iranian producers, however, explored other export markets.