the import of steel sheets has practically stopped due to the intensification of sanctions, significant growth of the exchange rate and limited resources of the country. As if importing sheets at such a foreign exchange price is not economically viable for producers.
In such circumstances, custodians and policymakers are expected to change the way products are delivered or to prevent such intermediation with adequate oversight.
It is worth mentioning that during the past years, a significant capacity of the steel pipe and profile industry has been established in the country, and if the raw materials are provided to these units, the mentioned capacity can be used to boost production and create more value. In addition, several job opportunities are created in the country that lead to economic prosperity. We have now talked to industry activists to investigate the causes of these challenges and identify solutions to these problems.
*** Production growth requires requirements
Kiomars Fathollah Kermanshahi, secretary of the Syndicate of Manufacturers of Pipes and Steel Profiles, said in an interview with Samat: “This year, it has been registered by the Supreme Leader of the Revolution as a leap in production and the realization of this slogan is always reminded by the officials.” At the same time, the realization of the production leap requires requirements. Among other things, the initial preparations must be made to move in the direction of production, and export is one of the requirements in the direction of achieving a leap in production. However, the export-oriented strategies chosen by policymakers are not very encouraging. As in the first months of this year, exports of steel products have been reported to decline.
*** Production with 20% capacity
Kermanshahi, emphasizing on solving the existing challenges in the activity of producers of pipe products and steel profiles and its impact on the realization of the production leap, stated: Supplying raw materials is the most important challenge of these industrial activists. These challenges exist and affect the process of activity of producers that this industry has a high impact on job creation and its activity is considered as completing the value chain. If production flourishes in these industries, they have the capacity to play a special role in currency exchange through exports; Therefore, as far as possible, crude sales in the steel chain should be avoided and the production of value-added end products should be further facilitated.
The secretary of the union of producers of steel pipes and profiles added: “Currently, the units of producers of steel pipes and profiles that are members of this union, operate with an average of only 20% of their capacity, because only the same amount of raw materials are provided through the commodity exchange.” . Undoubtedly, activity with such a capacity is not economically viable, and the continuation of the activity of these groups is in danger. Meeting the needs of downstream industries should be a priority for upstream units in order to address some of the shortcomings in this area.
*** Import of raw materials should be taken seriously
Kermanshahi said: “According to the capacity measurement performed in the optimization system, there is currently more than 18 million tons of capacity to absorb steel sheets in the country’s pipe and profile industry.” However, according to the estimates of the Syndicate of Manufacturers of Pipes and Steel Profiles, the capacity of the active units in this sector is currently about 5 million tons, but the raw materials are provided to these producers much less.
Due to the significant shortage of raw materials required for the production of pipes and profiles, part of this need must be met through imports. As in previous years, part of the downstream units’ need for hot-rolled steel sheets was met by imports. But now these imports have stopped due to the escalation of international sanctions and the devaluation of the currency. In such circumstances, those in charge are expected to take steps to supply raw materials for the pipe and profile industry by facilitating imports. This facility should be considered in various areas such as currency allocation, order registration, import tariff reform, etc.
*** Facilitate exports develop production
He added: “Producers can be supported by measures such as providing facilities and liquidity, as well as supporting exports and international marketing.” The WTO, as the custodian of export development, is also expected to provide minimum sales conditions in other countries. In such a situation, producers can continue to produce with peace of mind about selling their products. Kermanshahi added: “The export of final products is of special importance for the country, because in the current situation, the country’s oil exports and the resulting exchange rate are severely limited.” Undoubtedly, in such circumstances, part of the country’s need for foreign exchange can be met by taking advantage of non-oil exports.
In export development, downstream circles of parent industries such as steelmaking and complementary industries should be considered. If these industries are supported, they can offset part of the country’s oil revenues. In such circumstances, government officials can accelerate the realization of the mentioned goals by facilitating production, as mentioned earlier, the establishment of export management companies, and so on.
In the end, the secretary of the Syndicate of Manufacturers of Steel Pipes and Profiles said: “Despite the fact that there is only about one year left in the life of the government, it is possible for the authorities to take various measures to facilitate production conditions in various industries.” Just as the Supreme Leader of the Revolution recently emphasized that governments plan for a 90-day period at the beginning of their term. Now, at the end of their working life, they can make plans for the remaining time, which is also significant, and implement significant measures.
*** Hoping to fix the problems
Mehdi Malek Sabet, Vice President of The Steel Pipe and Profile Manufacturers Syndicate noted that the constant change and vacancy of the Minister of Industry, Mines and Trade in recent months has faced many industries with serious challenges. Therefore, it is to be hoped that someone familiar with the affairs will be appointed to the ministry so that the existing problems can be resolved.
He mentioned the shortage of raw materials as one of the main challenges for the producers of steel pipes and profiles and added: “If the transparency in the supply of raw materials increases, some of the shortages will be eliminated.” At present, part of the hot rolled sheet produced in the country is provided to buyers in the form of matching transactions and a part is also offered on the stock exchange.
In order for stability to return to this market, the parties to the match must first be identified. “Currently, the quota for the supply of steel sheets to companies producing pipes and profiles has been drastically reduced,” Malik Sabet said. Now the question arises as to what exactly the hot-rolled steel sheet produced in the country is used for, which the producers have faced with these serious challenges.
Manufacturers’ share of raw materials has dropped dramatically in recent months to the point where they only provide 5 working days. In such circumstances, the import of steel sheets has practically stopped due to the intensification of sanctions, significant growth of the exchange rate and limited resources of the country. As if importing sheets at such a foreign exchange price is not economically viable for producers.
*** Steel sheet production capacity
The vice president of the Syndicate of Manufacturers of Steel Pipes and Profiles added: “If the steel sheet production units regularly provide their final products to the real producers of this industry, some production challenges will be solved.” In addition, the final product can be provided to the final consumer at a reasonable price. Manufacturers will also be able to meet their needs.
He said: the production capacity of pipes and profiles in the country has exceeded the production capacity of steel sheets. The nominal capacity of the country’s steel pipe and profile production units is estimated at 18.5 million tons. Of course, the capacity that can actually produce is reported to be 4.5 to 5 million tons. However, the production capacity of steel sheets is much lower. Especially that other industries such as automotive and home appliances also use this sheet to produce the final product.
In fact, to meet the full demand of these industries for raw materials, imports are necessary, and if imports with appropriate currency, can have a significant impact on meeting the challenges of this industry.
Malik Sabet added: “If the ground for production growth in the industry of manufacturing steel pipes and profiles is provided, it is possible to provide the ground for the development of its exports.” Iran’s neighboring countries have a high capacity to consume these products and this capacity can be used to develop production in the pipe and profile industry.
*** Concluding remarks
In addition, production and economic activity in our country faces serious challenges; Therefore, those in charge are expected to support the activities of these producers by creating stability and calm in the field of production and trade.
From all of the above, it can be seen that a significant part of the shortage of raw materials needed to produce pipes and steel profiles is due to the inadequate supply of this product. Therefore, the release of supply and demand for steel sheets can be considered as a solution to this challenge. Under such circumstances, the opportunity for intermediation disappears and the market moves towards equilibrium.
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