Iran’s steel market faces mounting challenges amid regional competition and domestic pressures

Iran’s Steel Market Faces Mounting Challenges Amid Regional Competition and Domestic Pressures

Iran’s steel export market is navigating a turbulent period, primarily driven by heightened regional competition and persistent domestic challenges. The country’s billet exports, once a significant driver of foreign exchange, are struggling to maintain momentum. Asia, a key destination for Iranian semi-finished steel, is increasingly dominated by China's aggressive pricing and logistical advantages. This trend is squeezing Iran’s competitiveness in an already price-sensitive market.

Structural and Economic Pressures

Iran’s internal structural problems further compound the external challenges. Chronic issues with gas and electricity supply are disrupting production cycles, making it difficult for steel producers to maintain consistent output. Additionally, the country’s unofficial currency market, which has seen the Iranian rial lose significant value, is putting downward pressure on export prices. The unofficial exchange rate fell from 1 USD = 77,150 toman last week to 79,100 toman this week, further eroding the profitability of exports priced in dollars.

These economic pressures are reflected in the current pricing environment. Offers for induction billets range between $435-$445 per ton FOB, while electric arc furnace (EAF) billets have occasionally reached target prices of $450 per ton FOB. However, market participants report limited success in achieving these price levels. Deals this week are reportedly centered around $430 per ton FOB or lower, highlighting the difficulty in closing large-volume sales.

Regional Competition and Export Limitations

A market expert notes that Iranian billet faces significant competition from Asia, where Chinese suppliers are undercutting Iran both on price and logistical convenience. Customers can procure billets from China at lower costs and with fewer complications, making it nearly impossible for Iran to secure substantial sales at current price levels without significant discounts. This predicament is exacerbated by the lack of demand from other key export markets.

Adding to the woes, some large anticipated tenders from prominent Iranian producers for EAF semi-finished products remain unresolved, signaling uncertainty about future demand. Meanwhile, smaller-scale deals have surfaced, such as a 5,000-ton billet offer from Sri Lanka at $465 per ton CFR, but such deals do little to offset the broader market challenges.

Strategic Overhaul Needed

Experts suggest that Iran’s steel industry requires a comprehensive strategic transformation to remain competitive. With Chinese dominance in Asia and the depreciation of the rial, Iran’s current export pricing and operational inefficiencies are unsustainable. Long-term solutions could include investments in energy infrastructure, closer alignment of the official and unofficial exchange rates, and enhanced marketing strategies to regain footholds in alternative markets.

Outlook

As global steel markets remain volatile, Iran’s ability to navigate these challenges will determine the trajectory of its steel export industry. In the short term, Iranian exporters may need to accept lower profit margins to sustain market presence, while addressing structural bottlenecks to secure long-term competitiveness. Without such measures, the country risks losing further ground in an increasingly cutthroat regional market.