Iranian metallurgy struggles with electricity and gas shortages

Although the Islamic Republic has aspired to become the world's seventh largest steel producer, the data shows that it is struggling to maintain its place in the top ten.

According to industry sources, Iran's steel production has plummeted as the regime faces severe shortages of electricity and gas vital to running the factories.

The Iranian Chamber of Commerce, Industry, Mining and Agriculture says the blackout in Iranian year 1400 ending in March 2022 resulted in the loss of seven to eight billion dollars of non-oil exports.

Some industry experts say that losses of this magnitude, while oil exports were cut due to US sanctions, have led to a shortage of foreign exchange in Iran, which has contributed to its sharp decline since September.

The Iranian rial has fallen from 260,000 per US dollar last August to 540,000 this week.

Ahmad Mahdavi Abhari says that 45% of Iran's non-oil exports are related to petrochemicals, stating that "urea and methanol exports have decreased by 2.5 million tons due to gas cuts, which means exports are worth $700 million."

Zakaria Nayebi, a businessman in the steel industry, says production of steel ingots and direct reduced iron has fallen in three months due to power and gas shortages.

While officials in the Islamic Republic were predicting a bad winter for Europe, offices and schools in Iran were closed for several days during the winter due to severe natural gas shortages.

Iran has failed to invest in its gas sector, although it has the second largest reserves in the world. The distribution network also needs to be upgraded, as more than 25 percent of the gas is lost in transmission.

Earlier this year, an Iranian industrialist said gas and electricity shortages would likely cut steel production by two million tons. Reza Shahrestani said that there is an acute shortage of gas for industry, adding that metallurgy needs 40 million cubic meters of gas daily, but currently their consumption has reached 15 million cubic meters per day, adding that almost 50% of the electricity supply for industry has also been cut off. .

“The shortage of gas has also led to a shortage of electricity, since the current amount of natural gas does not meet the needs of power plants in the production of electricity,” he stressed. “It looks like gas and electricity shortages will be more severe next year if this continues. This will have a tangible impact on the pace of production in all sectors,” he added.

The World Steel Association, in its March report, removed Iran from the list of 10 largest steel producers in the world, and Italy was replaced by Iran. Iran has always ranked among the top ten largest steel producers in the world, and in the first two months of 2023, Iran was the ninth largest steel producer after Turkey.