The previous Iranian government (headed by Mohammad Khatami) had drawn up plans for the establishment of new steel mills in a few specific areas - such as Isfahan, Khorasan, Yazd - which offered several advantages as bases for the steel industry. Among the advantages in question were ease of access to
iron ore mines, and the railway network, in addition to the availability of gas, electricity and water supplies. However, President Khatami's government went out of office before it had a chance to implement its proposals. Subsequently, President Ahmadinejad's government modified the old plans by extending plant sites to eight undeveloped areas, instead of limiting them to just a few bases. The new mills include:
- Ghaenat Steel in southern Khorasan Province
- Sepid-Dasht Steel in Chahar Mahaal and Bakhtiari Province
- Shadeghan Steel in Khuzestan Province
- Miyaneh Steel in West
Azerbaijan Province
- Bafgh Steel in Yazd Province
- Nayriz Steel in Fars province
- Sirjan Steel in Kerman province
All of the plants will use the Midrex Process for
production and have a capacity of 800,000 tons per annum each. These plants will begin by producing semi-finished products such as pellets,
billet,
slab, ingot, bloom and will proceed to the
production of long products in their subsequent phase.
Construction work on some of these projects has already started, while the others are due to get underway in the near future.
The government has decided to use these
investments in the steel industry as a means of developing remote cities and poor areas. Finance for these projects is provided by the high amounts of foreign currency revenues brought in by the rapid rise in oil prices of the last 3-4 years. These revenues mean that the Iranian government is able to supply finance for investment in the different fields of industry, in spite of the current moves towards privatization and private sector
investments. On the other hand, high oil-income has activated all infrastructure projects usually invested in by the government – for which the
construction work is traditionally carried out by the private sector. Investment in the
construction of new buildings and apartments, in contrast, has usually been in the hands of the private sector in
Iran.
In addition to the above-mentioned steel industry projects, there are some other development projects involving existing mills such as Mobarakeh Steel, Isfahan Steel, Khorasan Steel etc. These projects, combined with the eight new mills previously referred to, should achieve a total
production capacity of 29 million tons per annum by the end of the Fourth Socio-Economic Development Plan (2010). At present,
Iran produces about 10 million tons of steel per annum and should reach its ambitious target of 29 million tons within the next four years.
Iran has large deposits of
iron ore and has the second highest gas reserves in the world after
Russia – clear advantages supporting
investments in steel plants. Yet there is a risk yet that
Iran may not be able to extract enough
iron ore to feed the existing and new steel plants. Besides, there has been little room for the private sector in the establishment of the eight new plants or the development projects for existing plants.
Meanwhile, the reconstruction of war-torn countries such as
Iraq,
Afghanistan, and
Lebanon, along with very large development projects in oil-exporting countries (especially in the Persian Gulf region) has created very rapidly rising demand for
construction materials, in particular for steel. However, the high demand for steel from the Iranian domestic market, as well as from the above-mentioned markets, means that the local prices in
Iran for constructional grades/sections usually exceed global prices.