Introduction
Steel sheets are among the most important products in Iran’s steel supply chain, used extensively in various industries including automotive, construction, home appliances, pipes and profiles, oil and gas, and many other sectors. Given the existing capacities and development plans, a detailed review of production and trade in this sector can help identify strengths and weaknesses and provide effective solutions.
The Importance of Steel Sheets in Iran’s Industries
The automotive industry is one of the main consumers of steel sheets. Approximately 60% of a vehicle’s weight consists of steel sheets. Cold-rolled and galvanized sheets with thicknesses below 1 mm are used for car bodies, while hot-rolled sheets with greater thicknesses are used for chassis and axle components. In the home appliance industry, steel sheets are widely used for manufacturing refrigerator bodies, washing machines, air conditioners, and other household appliances. In the pipe and profile industry, non-alloy hot-rolled sheets with a thickness of 2 mm have the highest consumption.
Steel Sheet Production Status in Iran
In 2020 (1399), over 30 million tons of crude steel were produced in the country, of which about 20% was exported as raw material. Iran’s crude steel production capacity is expected to reach 55 million tons by 2025 (1404), but downstream unit capacity will increase by only 6 million tons, indicating continued raw material exports.
In the hot-rolled sheet sector, 9 production units are active with a total capacity of 9.1 million tons. About 67% of this capacity is currently utilized, leaving over 3 million tons of idle capacity. Hot-rolled sheet production has fluctuated significantly in recent years, with private sector production declining from 800,000 tons in 2012 to 500,000 tons in 2018.
In the cold-rolled sheet sector, 5 production units operate with a total capacity of 4.2 million tons, of which only about 60% is utilized. Coated steel sheets have a total capacity of 4.7 million tons, with only about 35% utilization.
Steel Sheet Trade
Analysis of steel sheet imports and exports shows that the average annual import value of steel sheets is approximately $1.5 billion. Low value-added products such as hot-rolled sheets with low width and high thickness are exported, while high value-added products such as hot-rolled sheets below 3 mm, cold-rolled sheets below 1 mm, and various alloy sheets are imported.
Hot-rolled sheet imports decreased from $700 million in 2011 to about $300 million in 2020, but this decline is primarily due to industrial recession rather than increased domestic production. In the cold-rolled sheet sector, imports dropped from $530 million to approximately $10 million, while exports reached about $9 million. Coated sheet imports also declined from $770 million in 2011 to about $200 million in 2020.
Key Challenges in the Steel Sheet Industry
Raw Material Exports and Idle Capacity: While over 3 million tons of idle capacity exist in hot-rolled sheet production, approximately 1.6 million tons of steel slabs are exported annually. Export tax exemptions encourage producers to export raw materials rather than process them domestically.
Capacity Shortage in High Value-Added Sheets: The country faces a capacity shortage in producing hot-rolled sheets below 3 mm, which are essential for pipe and profile industries and serve as feedstock for cold-rolling units.
Administered Pricing: Pricing mechanisms are structured so that the combined cost of raw materials and operational expenses, without considering profit margins, equals the final selling price of cold-rolled or coated sheets, leading to losses for producers.
Feedstock Shortage for Downstream Units: Cold-rolling and coating units cannot operate at full capacity due to feedstock shortages, requiring a significant portion of domestic demand to be met through imports.
Lack of Alloy and Stainless Steel Sheet Production: Currently, no domestic producer manufactures alloy and stainless steel sheets, despite annual imports of approximately $400 million.
Recommendations for Improvement
Define Investment Priorities: Establish a priority list for investment in the steel supply chain focused on reducing imports and increasing value addition, with emphasis on hot-rolled sheets below 3 mm, wide sheets, cold-rolled sheets below 1 mm, and alloy and stainless steel sheets.
Reform Tax System: Eliminate tax exemptions and impose duties on steel products with incomplete supply chains, while providing tax incentives for higher value-added products.
Value-Based Ranking: Rank companies based on value-added per ton (dollar per ton) rather than production tonnage, and use this ranking for allocating government facilities and energy subsidies.
Aggregate Market Needs: Consolidate the needs of various industries for alloy and stainless steel sheets to conduct detailed market studies and attract investment.
Support High Value-Added Production: Provide financial and technical support to private companies with plans to produce alloy and stainless steel sheets.
Conclusion
Iran’s steel sheet production industry, despite its significant capacities, faces serious challenges including raw material exports, administered pricing, feedstock shortages, and lack of high value-added product manufacturing. Implementing the recommended solutions—including tax system reform, defining investment priorities, and supporting strategic product manufacturing—can help reduce imports, create employment, and generate greater foreign exchange earnings for the country. The steel sheet industry has substantial potential to become a key driver of Iran’s industrial development, requiring serious commitment and careful planning.
