China is the main culprit behind the global steel supply/demand imbalance, while slowing Iranian construction demand and lack of state support for the steel industry are hurting Iran’s steelmakers. So said Mostafa Moazzenzadeh, advisor to Iran's First Vice President Eshaq Jahangiri Kouhshahi, at an industry meeting in Tehran this week.

Chinese exports surpassed 100 million tonnes in 2015, driven by state subsidies and dumping strategies, which led various countries to hike import tariffs and closed off certain markets from global trade, according to Moazzenzadeh.

Domestically in Iran, Moazzenzadeh identified cooling construction demand, pressure from years of economic sanctions and the influx of China-origin imports as the main reasons hampering the Iranian steel industry. Government intervention in steel supply chain pricing, lack of steel industry support, and high mining royalties also contributed negatively to domestic steel sector development.

However, steelmakers are also to blame for failing to increase efficiency and reduce production cost during the steel market’s boom period, when they instead focused solely on increasing output, he added.

“Historically, there has always been a boom period following a deep recession; now the stage is set for moving out of the current recession,” Moazzenzadeh said at the Sixth Iranian Steel Market Conference monitored by Kallanish. Iran should prepare itself for a boom period following the removal of sanctions by establishing more mills using its abundance of cheap resources, he concluded.

Iranian industry, mines and trade ministry deputy minister Mehdi Karbasian said that, although weak steel demand is likely to continue in 2016, Iran will benefit from the end of sanctions. “The sanctions did hurt us, but they also hurt the Europeans, and now they are here for business,” observed Karbasian, who is also chairman of the Iranian Mines and Mining Industries Development and Renovation Organisation (Imidro). He sees Iranian steel output flat on-year at 16mt in 2016.

Peter Marcus, managing partner of World Steel Dynamics (WSD), said at the event: “There is currently an extended pricing death spiral condition which started at about 2014.” This is the first time a downtrend in steel prices has continued for so long and been so deep, he added. Pressure from Chinese exports is seen likely to continue.

Iran’s steel industry has the advantages of an educated workforce, low-cost and abundant iron ore and gas reserves, and a good location for low-cost exports, according to Marcus. However, its technology is outdated, and it has low-quality iron ore pellets and DRI. Moreover, production and transport costs are high, and plants have too many workers.