Business Monitor International in its new report, titled “Iran Metals Report Q3 2011” stated that the growth of Iranian steel and aluminum capacities is very rapid, so not being accompanied by a similar rise in domestic and external demand.

The report which has been released recently, predicted that the capacity utilization of Iranian steel and aluminum insutries, to fall below 50% by 2015 if planned plants are commissioned on schedule. 

The Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) said that Iranian steel production will reach 46mn tons per annum (tpa) once the ongoing projects come on stream, with 26mn tpa of capacity expected on stream by March 2015. 

BMI cited, however, steel output was just less than 12m tons in 2010, utilizing just 60% of capacity. 

For the Iranian year, which runs from 20 March, output was 12.43m tons (up 14%), which was well below the 14m tons predicted by the government, the report added. 

Over the next four years, aluminum and copper production capacities are set to rise by 400,000tpa each, according to the report. 

This will push aluminum capacity to over 900,000tpa and copper capacity to over 600,000tpa. 

BMI believes in the first four months of 2011, steel output was up 10.7% year-on-year (y-o-y) to 4.34m tons.  Bearing in mind year-to-date data and projected economic trends, BMI believes full-year output will exceed around 13.4mn tons with growth at 12%. 

“Moreover, we expect output to reach around 20m tons in 2015, which would represent a two-thirds increase over 2010 levels, but would still mean that the country's steel industry was operating at less than half capacity if current projects are commissioned on schedule”, BMI stated. 

Despite concerns regarding overcapacity, BMI emphasized that Iran is pressing ahead with a number of new projects. In January 2011, construction began on a new mini mill with annual production capacity of 1m tpa of steel billet at Abarkooh, Yazd province. 

A new 500,000tpa melt shop was due to come online at the Bonab Steel Complex in East Azerbaijan province in June 2011, bringing total crude steel capacity to 1.5mn tpa. Natanz Steel is also due to commission a meltshop with capacity of 600,000tpa of billet some time in 2011, which will feed its existing rolling lines that produce rebar and wire rod. 

Meanwhile, in Q211 work commenced on the construction of the Damghan Kavir Steel plant with the first phase to consist of a rolling mill with capacity of 300,000tpa rebar. 

In May 2011, a tender was announced for the expansion of Mobarakeh Steel's Saba continuous strip processing plant with annual capacity of 700,000tpa with facilities including an EAF, a thin slab caster and a hot rolling line. 

Ghadir Iranian's new direct reduced iron (DRI) plant was launched in Ardakan in May with capacity of 800,000tpa. Sirjin Steel is planning a IRR3.5trn (US$330mn) second phase in Kerman province with a DRI capacity of 1mn tpa to be completed in 2012. Kerman is also the location chosen for a possible new steel plant with capacity of 1.5mn tpa, announced in April 2011. 

In the aluminum sector, BMI predicted that production reached an estimated 410,000 tons in 2010/11, representing growth of 19.8% y-o-y. 

The inauguration of the 147,000tpa Hormozal smelter in Hormozgan in late-2010 will boost primary aluminum production in 2011, although we are not confident that the plant will produce at full operating rates.