Iraq was a potential market for Iranian steel. This country, which started the development path a decade ago and has a very weak infrastructure, is a very attractive market for any producer. Iran has spent years trying to secure Iraq’s export route. This year, unfortunately, due to production problems and the recklessness of the relevant managers, we are witnessing Turkey overtaking the Iraqi market and dedicating this market to its long-time rival in the steel market. Iraq is one of the best commercial destinations for Iranian steel.
If we leave this market to Turkey, we will see a decline in the position of steel in the region and a decrease in the profitability of steelmakers, and most likely we will see an increase in the unemployment rate in Iran. This is a great disaster in the current situation. In the following, we will examine the different angles of this issue. Please be with Artan Press.
*** Indescribable hardships to maintain Iraq’s export route
The steelmakers worked hard to develop Iraq’s export route. This business had a long-term vision. Many traders minimized their profit margins for the Iraqi market. In the hope that they can keep the Iraqi side satisfied with the purchase for a longer period of time. But things did not go well at all. All the savings of years of hard work and suffering of steel managers in a recent month due to power outages and closures of production units and the inability of factories to meet customer needs were smoked and went up in the air. In a long dream, the managers of the country offered the Iranian steel market in Iraq and Erbil with a two-handed thirsty rival, Turkey.
*** Turkey overtakes Iraq in the field of steel exports
Turkey has always had an eye on the Iraqi steel market. The path of Iraqi exports to Iran has been very good and without challenges until the past years. In recent years, Turkey has made great efforts to attract the Iraqi market. But due to low settlement costs, Iran was not able to compete with the Iranian side. The decline in Iranian steel production in recent months has given the Turkish side the opportunity to easily and even with high transportation rates take the Iraqi market out of Iran’s control.
This is an issue that we have mentioned in the analysis of steel cuts from the first days. It was clear that the inability of Iranian steelmakers to meet their obligations would challenge Iraq’s export path. In the true sense of the word, Reza Shahrestani’s statement about these conditions speaks for itself. In the long dream of the country’s leaders, the Iranian steel market in Iraq and Erbil was handed over to a thirsty rival, Turkey.
*** Iran’s economic defeat against the Turks in the steel market
It is safe to say that this is not an economic failure alone. The various dimensions of this issue can also be interpreted in political terms. For many years, Turkey has been trying to take over the Iraqi market. But disregard for the electricity supply policies of the producers led to the fact that the sanctions were unable to reach this situation. Iraq’s export route from Iran has suffered one of thousands of self-imposed sanctions on the economy. In recent years, this trend has retained its original form in any form. The Ministry of Energy, with its policy of cutting off industrial power and without considering other scenarios, has taken the country’s steel and industrial economy in a direction that is unprecedented in the last ten years.
*** Negative outlook for the steel economy if Iraq’s export are cut off
It took years for the Iraqi market to be taken over by Iranian steel companies, and these companies were able to offset their accumulated losses with their exports and provide a major share of the country’s foreign exchange needs. Unfortunately, all the savings of years of hardship and suffering of the steel industry in a recent month due to power outages and closures of production units and the inability of factories to meet customer needs were smoked and blown up. This is just one side of the story.
Steel production in Iran is forced by foot energy subsidies. If these customers are not neighbors, Iran will face a big challenge in the future to export its products. Iraq’s export route from Iran was one that could accelerate the growth of Iran’s industrial economy in the short term. Production of steel with subsidized electricity and water and other inputs provided to factories does not create added value for the country, you can talk about added value when you buy factory electricity and gas at world prices.
*** Inefficiency of steel production in Iran and the challenges of Iranian steel competitiveness
Despite significant reserves of iron ore and raw materials required by the steel industry, Iran has not had any acceptable growth in production optimization processes. Iran can not compete with the world’s pure products in the steel sector. If Iraqi exports are cut off, Iranian steel will be under unprecedented pressure in terms of foreign revenue. Billions of cubic meters of fuel are now subsidized to steel producers, or one-tenth of the world price, and supplied by the factory, but the cost of domestically produced products is higher than that of Chinese products.
If there are not a few export markets to compensate for the costs, we will most likely see the closure of factories and the reduction of steel production capacity in Iran. This means more economic pressure, more unemployment in the industrial sector and the closure of factories. To date, no practical action has been taken to support production and disrupt this path. If this slogan had been realized, we would not have witnessed this disorder in the outlook for steel and the industrial economy.
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