Iran’s steel output will be negatively affected by severe power shortages that started in June and still remain an issue, market participants said.
Iran steel output
Iran Power Generation, Distribution & Transmission Co (Tavanir) ordered steel and cement production factories to reduce electricity consumption starting Tuesday July 6, local news provider Financial Tribune reported on July 7.
“Iranian mills are instructed by the government to cut electricity consumption by a minimum of 50% in July due to power outages and a shortage of electricity in the country and extremely hot summer,” one trader source said.
“The mills are now in negotiations with authorities regarding the actual figure of the electricity consumption cut,” he said. “It will depend on the region. Some mills in the south of the country were [ordered to cut] 100% of electricity consumption and had to stop production. So they are issuing force majeure certificates for July rolling.”
Another source said the changes will mainly affect mills that do not have their own power plants.
“But in fact, most of them have them,” this source said.
Iran’s crude steel output totaled 2.6 million tonnes in May, according to World Steel Association estimates, representing a 7.7% year-on-year increase.
In the first five months of 2021, Iran’s crude steel production rose by 9.2% year on year to 12.5 million tonnes, according to Worldsteel.
Market participants said that lower steel output could affect steel export volumes.
Iran exported 1.44 million tonnes of steel products in the first two months of its current year (running from March 21-May 21, 2021), almost double the year-earlier level, supported by demand in Asia and the Middle East, according to the Iranian Steel Producers’ Association (ISPA).
Semi-finished steel products drove the growth, with exports of the product increasing by 133.6% year on year to 967,000 tonnes during the period, the ISPA said.
Billet and bloom sales to foreign customers rose by 90.09% to 652,000 tonnes from 343,000 tonnes, driven by demand in Asia, particularly China.
Slab sales more than quadrupled to 315,000 tonnes from just 71,000 tonnes in the same comparison.
Fastmarkets’ weekly price assessment for steel billet, export, fob ports Iran, was $595-609 per tonne on July 7, down by $3-5 per tonne from $600-612 per tonne fob a week earlier.
Fastmarkets’ weekly price assessment for steel slab, export, fob ports Iran, narrowed upward by $10 per tonne week on week to $740-770 per tonne on July 7.
“Iran can not continue the production and export of steel because of the shortage of electricity. Then it should leave the market scene for a while, [and] therefore prices will increase,” a local steel producer source said.
The “lack of supply from Iranian mills will support [Commonwealth of Independent States] mills’ recent attempts to rise prices,” a trading source said.
Fastmarkets’ daily steel billet index, export, fob Black Sea, CIS was calculated at $637 per tonne on July 7, up by $14 per tonne from $623 per tonne a day earlier.
The increase was due to higher offer and deal prices heard in the market.
Iran power consumption in figures
Iran’s power consumption has topped 60,000 megawatts per day this summer, a more than 10% increase from last year, while electricity generation has been steady at 50,000-56,000 megawatts, local news provider Iran International reported on July 4.
With electricity remaining subsidized and cheap, there is no incentive for people to limit its use. Cryptocurrency mining by huge computer farms, for example, are estimated to consume up to ۱۰% of electricity supply in the country.
There are only 50 licensed bitcoin farming plants in the country, Tanavir said, noting that ۸۵% of cryptocurrency mining is illegal.
Electricity consumption in Iran hit a new record high on June 29, when usage rose to more than 64,000 megawatts, which despite lower usage by industry is 9,800 megawatts higher than at the same time last year. Daily usage of cooling systems is around 19,000 megawatts. But June heatwaves are nothing new in Iran and the nearly 20% surge in consumption is hard to explain.
A spokesperson from Iran’s electricity network said on Saturday that high consumption has increased the gap between power generation and usage to 11,000 megawatts per day.
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