Iranian steel production and exports drop in May amid Ukraine conflict

Sanctions-hit Russia is selling steel at ‘heavily discounted prices’ in global markets, hitting exports by other producers, Rystad says

Russia is flooding the market with cheap steel after sanctions imposed by the US, the EU and their allies. EPA

Iranian steel production fell for a fourth consecutive month in May as domestic consumption continues to drop and exports slide as a result of cheap Russian steel flooding the global market, according to a new report.

One of the world's top 10 steel-producing countries, Iran’s decline of 10.8 per cent last month far exceeds all other major countries, according to Rystad Energy in Oslo.

“The production restraint of late is more to do with export reductions and demand in the external market, which they [steel producers] say is being saturated by Russian steels at heavily discounted prices,” said Alistair Ramsay, vice president of Rystad.

Russia’s steel, oil and other products have been hit by sanctions from western nations, including the US and the EU, in retaliation for Moscow's military offensive in Ukraine.

Russian steel demand could slump 30 per cent, or 13 million metric tonnes, year on year in 2022, S&P Global Commodity Insights said in March, citing the Russian steelmakers association.

But Moscow has been offering heavy discounts to boost sales in international markets.

“Russian [steel] output has broadly stabilised so far this year [at -0.7 per cent after five months] and not only outperformed Iran but most other major producing countries this year, which is surprising given the war with Ukraine (where output has collapsed) and barriers to Russian trade in Europe and the US,” Mr Ramsay said.

Iranian steel exports were increasing before Russia attacked Ukraine, Rystad said.

Exports from the country, largely semi-finished shapes consisting of slabs and billets, had risen 25 per cent year on year to 7.7 million metric tonnes, in the Iranian calendar year ending March 20, 2022, the report said.

Direct reduced iron exports, which also compete with Russian options, and finished steels, also rose by 20 per cent each during the period, it said.

“That final month alone, when Russia’s invasion began, Iranian exports accelerated as more than one million metric tonnes of semis [semi-finished steel] were shipped (85 per cent up year on year) and almost 400,000 tonnes of steel, doubling the total from the year before,” Rystad said.

Globally, however, it seems more likely that demand is in retreat rather than Russia undergoing an export boom, the report said.

"Steel prices remain relatively depressed, and weak demand is encouraging all but Indian producers to cut back."

World crude steel production for the 64 countries reporting to the World Steel Association stood at 169.5 million tonnes in May 2022, a 3.5 per cent annual decrease.

The association forecasts that steel demand will grow 0.4 per cent in 2022 to reach 1,840.2 million tonnes.