Iran: After power, mills now face gas curbs; steel production may drop further

Iranian steel mills are struggling with the natural gas curtailment issues which are severely impacting their production volumes. The National Iranian Gas Company, in a letter, has notified the steel mills of restrictions on natural gas supply during the current winter season.

However, it is expected that the impact of the supply restriction will indeed be felt from mid-December onwards. The colder the temperature, the greater the restriction in gas supply will be imposed, it is learnt.

“The gas supplies of a few steel mills have already been terminated, which will affect production and business except those mills with blast furnaces (BF). Mills with electric arc furnaces (EAFs) would be more affected,” an Iranian source told SteelMint.

The curbs on gas supply this year, which were unexpected, are expected to be more severe than the electricity usage restrictions and may lead to a loss of around 25% in Iran's annual steel production volumes, as per reports.

It may be recalled, Iranian steelmakers suffered electricity usage curtailments in the form of widespread blackouts in the scorching summer which impacted the country's steel production.

Iran’s production of finished steel in the first seven months of the current Persian Year (21 Mar-22 Oct’21) stood at 11.03 mn t, lower by 8% y-o-y as against 11.95 mn t seen in the corresponding period last year (CPLY).

Outlook

Billet export allocations from Iranian mills may get adversely impacted due to the ongoing crisis. If sources are to be believed, one of the key billets exporter has been notified on curtailment of natural gas supplies. However, the company, hoping to wrest some relief, is negotiating with the government on the issue. SteelMint’s assessment of Iranian billets (3 SP) was recorded at $570/t FOB last week.