Iranian Iron & Steel Industry Update To be presented by Mr. Keyvan Jafari Tehrani (Head of International Affairs) 1
Current Status of Iron Ore Business in Iran Iran is among the first 10 countries in the world and the first country in the Middle East in terms of having mineral resources and it has a high rank in the world due to having rich mines. The Decisive reserves of iron ore in Iran is 2.7 Billion Tons (0.8% of World Total Reserves). The Probable reserves of iron ore in Iran is around 5.15 Billion Tons. 2
Current Status of Iron Ore Business in Iran 2,359,012 46% 2,793,295 54% احتمالی قطعی 3
Current Status of Iron Ore Business in Iran There are 5445 mines under the operation in Iran. Among the various mines, iron ore mines have the highest employment with 18,510 employees. The production trend of iron ore in Iran is ascending and its average annual growth is 13 percent. This growth rate in the long-term is higher than the mining sector's average growth rate of 11 percent. 4
Current Status of Iron Ore Business in Iran The iron ore industry in Iran has a faster growth rate than the other mines that may indicate the production capacities of iron ore industry. 60 50 Amount of Iron Ore Production Between 2009 to 2015 50 45 40 30 33 28 28 37 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 5
Current Status of Iron Ore Business in Iran 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% iron ore production growth mining production growth 6
Current Status of Iron Ore Business in Iran Iron ore decisive reserves of major mines as an indication of the country's mines Gol-e- Gohar (Kerman) Sangan (Khorasan) Tons Chador Malu (Yazd) Tons 1 Billion Tons 850 Million 295 Million 7
Current Status of Iron Ore Business in Iran The iron ore export enjoyed a large increment in 2013 and reached to 23.6 Million Tons. The majority of the export routed to China. About 45 percent of export were produced by the private sector small scale mines. 8
Current Status of Iron Ore Business in Iran With the global price of iron ore decrement, Iranian iron ore export had a decline and reached to 20 Million Tons in 2014; this means 15% reduction compared to 2013. 25 20 15 10 5 Iranian Iron Ore Export between 1999 to 2014( Million Ton) 4.8 23.6 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 9
How is the Slowing Chinese Economy Affecting Trade Flows? By 2014, the majority of Iranian iron ore exports have been directed towards China. With the beginning of Iron ore crisis, which was caused by china economic growth reduction, Iran seeks to facilitate domestic rules and regulations for Iranian and foreign Investors and Traders. 10
How is the Slowing Chinese Economy Affecting Trade Flows? The Actions Taken Included: Making domestic rules and regulations favorable in comparison to the iron ore global crisis (reducing, rescheduling or differed payment by installments of state's royalty & reducing oversupply penalties). Planning for completion of the steel value chain. Creating a global price index for Iranian iron ore. Diversification of export markets. 11
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian Export Markets Currently, the Persian Gulf Region has the highest demands for Iron and steel products. MENA imports annually 36 Million Tons of steel, thus this large market will be an opportunity for Iranian steel manufacturers. 12
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian export markets 13
Algeria GDP current account balance Djibouti GDP current account balance Egypt GDP Fiscal year basis current account balance Islamic Rep of Iran GDP current account balance Iraq GDP current account balance Jordan GDP current account balance Lebanon GDP current account balance Libya GDP current account balance Morocco GDP current account balance Tunisia GDP current account balance Yemen. Rep GDP current account balance 2011 2.8 10.0 4.5-14.1 2.0 1.8-2.6 3.9 11.0 10.2 12 2.6-10.2 2.0-10.9-62.1 9.2 5.0-8.0-0.5-7.4-12.7-3.2 2012 3.3 6.1 4.8-18.4 2.2 2.2-3.9-6.6 6.6 10.3 6.7 2.7-15.2 2.2-8.1 104.5 29.1 2.7-9.7 4.7-8.2 2.4-1.9 2013 2.8 0.5 5.0-23.7 2.1 2.1-2.7-1.9 7.5 4.2-0.8 2.8-10.0 0.9-8.5-13.7-3.5 4.4-7.6 2.5-8.4 4.8-3.3 2014 3.0-3.3 5.5-33.0 2.9 2.2-0.9 1.5 3.6-27.0 2.0 3.0-11.3 1.5-8.3-21.8-24.3 3.0-5.9 2.3-9.1 1.9-3.6 2015 3.3-9.1 5.5-36.6 3.6 3.5-1.7 0.9-2.6 0.9-5.3 3.4-9.4 2.0-8.0 4.3-12.5 4.6-4.2 2.7-8.6 3.7-6.5 2016 3.5-9.3 6.0-40.6 3.9 3.8-1.8 1.0-2.2 7.0-2.2 3.9-7.9 3.4-7.3 4.4-11.2 4.0-3.6 3.5-7.3 3.8-6.1 2017 3.5-9.5 6.0-47.4 4.0 4.0-2.0 2.2-1.9 5.9-1.5 4.0-6.0 3.6-7.1 6.5-9.8 4.5-2.9 4.0-6.6 5.2 14-5.5
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian Export Markets Turkey: Turkey is an important target market of Iran's iron ore. After China and India, Turkey has been ranked as the third place in the world for the growth of crude steel production since 6 years ago. In 2013, Turkey imported 8.2 Million Tons iron ore with an increase rate of 3.47% compared to 2012, valued 1.16 Billion Dollars. In addition to iron ore, it imported 983 Thousand Tons of Pig Iron. Iron ore exporting countries to Turkey are as follows: Brazil 33.5%, Ukraine 24.3%, Sweden 18.4%, Russian Federation 14.6%, Canada 4.6%, Finland 3.6% and others 1%. 15
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian Export Markets Saudi Arabia: In 2009, steel consumption in Saudi Arabia was about 14.8 Million Tons. It is expected that by the end of 2015, this figure will have been increased to 26 Million Tons per year; that is an increase of over 75% within 6 years. 16
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian Export Markets Saudi Arabia: Due to a large consumer market and an apparent increase in steel production, Saudi Arabia will have the highest growth capacity of steel production and will have been the largest steel consumer market in the Middle East by 2025. According to the Royal Commission approval, the country, as the world's largest oil producer, plans to reduce its dependence on oil over the next 10 years and invests on non-oil exports, especially steel production. 17
How is the Slowing Chinese Economy Affecting Trade Flows? Iranian Export Markets Other Countries: Last year Iraq imported 500 Thousand Tons of iron ore for cement factories. Thus, the new policy of Iranian companies is to focus on new markets such as the MENA(both for Iron ore sales and steel export), instead of existing market. 18
How is the Slowing Chinese Economy Affecting Trade Flows? Planning for completing the Steel Value Chain Crude steel production in the Middle East (excluding Iran) in 2013 was about 50 Million Tons.. In the same year, Iran produced about 16 Million Tons of crude steel which ranks as the 14 th in the world and the 1 st in the Middle East. It represents a share of 1% of global production. 19
How is the Slowing Chinese Economy Affecting Trade Flows? Planning for completing the Steel Value Chain The consumption of steel finished products in the Middle East was 84 Million Tons in 2013. According to forecasts made by Metal Bulletin, this figure will reach to 100 million tons in 2019 with an average annual growth of 4.5 percent. Given Iran's advantages in the steel production, the steel industry and it's complete value chain are considered as one of the strategic industries to achieve the Country's Economic and Industrial goals in the Iranian Vision Plan of 2025. 20
How is the Slowing Chinese Economy Affecting Trade Flows? Planning for completing the Steel Value Chain Iran's Advantages in Steel Production : Iron ore mines. Energy resources. Land and high sea access to regional markets. High growth in the demand of the regional countries, especially for the development of infrastructure, refineries as well as petrochemical plants, gas network, cross-border gas transmission and the construction industries all over the region. 21
In What Way is the Iron Ore Pelletizing Bottleneck Affecting the Iranian Iron Ore Industry? Strategies to achieve the Vision Plan of the Iranian Steel Industries Development: Development of mineral exploration and exploitation activities required for the development of steel industries. Joint Ventures with other countries in order to establish and equip mines. Creation of A to Z complete production chain from the mine to the finished products. 22
In What Way is the Iron Ore Pelletizing Bottleneck Affecting the Iranian Iron Ore Industry? Requirements and Infrastructure to realize the Steel Industry's Development Goals : 1. In the beginning of 2015 Iran s environment business had been improved by 22 places according to the World Bank analysis. 2. Inflation Reduction. 23
In What Way is the Iron Ore Pelletizing Bottleneck Affecting the Iranian Iron Ore Industry? Requirements and Infrastructure to realize the Steel Industry's Development Goals : 3.Stability in monetary and currency policies along with transparency and reliance on global standards and amendment of the relevant laws to attract foreign investors. (For example, we have already received several inquiries from 15 countries to participate in the Mines and Mineral Industries of Iran so far). 4.Facilitating the attraction of foreign direct investment (FDI) and joint venture (JV) in order to transfer new technologies and use their sales and export network. 24
In What Way is the Iron Ore Pelletizing Bottleneck Affecting the Iranian Iron Ore Industry? Infrastructure Development for Producing 55 Million Tons of Crude Steel in 2025 A total of 159 Million Tons of Iron Ore will be needed as raw material to produce 90 Million Tons of Concentrate or 84 Million Tons of Pellets or 54 Million Tons of Sponge Iron. The Amount of Production in 2014: Iron ore Concentrate 28 Million Tons 19 Million Tons Pellets 21 Million Tons 25
In What Way is the Iron Ore Pelletizing Bottleneck Affecting the Iranian Iron Ore Industry? Infrastructure Development for Producing 55 Million Tons of Crude Steel in 2025: A total of 5630 MW of electricity, 18 Billion Cubic Meters of gas split and 295 Million Cubic Meters of water per year are required to achieve the target. Required Capital Investment: 12 Billion Euros for Production Lines and 16 Billion Euros for Infrastructures 26
The Impact of Removing Sanctions on the Production and Export of Iran Strategic Policies for Development of Iron and Steel in Iran: 1. Updating the extraction and processing machinery and equipment in the new mining and steel mills using eco-technologies. 2. Due to the sanction, unfortunately 80% of mining operations in Iran are done by old machineries. 27
The Impact of Removing Sanctions on the Production and Export of Iran Strategic Policies for Development of Iron and Steel in Iran: 3.Providing incentives for the use of new technologies to beneficiate the low grade iron ore to use in Iron and steel production processes. 4. due to the sanction, the majority of Iranian mineral reserves, in particular, low grade ones, cannot be processed and recycled, so a part of the reserves are excluded from mineral production cycle 28
The Impact of Removing Sanctions on the Production and Export of Iran Strategic Policies for Development of Iron and Steel in Iran: 5.Encouraging small and medium sized iron ore mines to establish common units of concentrate and pelletizing plants with economic scale. 6.Encouraging Foreign investors to participate in the mining sector through the creation of a consortium of Iranian and Foreign Companies. 7.Expedition of the allocation of banking financial resources for reducing the delay in project implementation, use of finance and foreign investment as well as attention to completing the production chain with the aim of reducing the working capital. 29
The Impact of Removing Sanctions on the Production and Export of Iran 1. One of the key provisions of the 5+1 Agreement is to release Iranian assets frozen in foreign banks and countries during the 4 past decades. A part of these assets will be directed towards production and one of the priorities in production is the steel industries. 2. The greatest impact of removing sanctions will be on the net export of Iran. 3. It depends on the banking sanctions and the swift network, and if removed, major export problems will be resolved. 30
The Impact of Removing Sanctions on the Production and Export of Iran 4. If an agreement is obtained, the removal of sanctions can open up many ways to the country's economy from removing brokers to more interaction with other countries with which there was little opportunity for interaction because of sanctions, in particular, those in the Euro Area. 5. On the other hand, given that different perspectives and directions open up, this can lead to increase export. However, increasing volume of trade with new countries may reduce trade with the countries that were previously the sole for transaction with Iran. 31
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