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EghtesadOnline: Global slab markets could see further downward pricing pressure, if plans to build a plant for slab production in Iran come to fruition.

Companies from Iran and Austria will collaborate to build a steel slab plant in the south of the Middle Eastern nation, sources in both countries have confirmed.

The news follows reports in Iran last week, which alleged that Austrian steelmaker Voestalpine and Austria’s federal finance ministry were both directly involved in the deal. Both parties denied involvement when contacted by Metal Bulletin last week.

Although the steel project deal has been agreed by organizations in both Iran and Austria, the need to finalize financing has prevented the agreement from being announced officially, an Austrian source told Metal Bulletin on June 20, according to Financial Tribune.

The steel plant–to be located in the Gol-e-Gohar region of southern Iran–will have capacity to produce 2.8 million tons per year of slab, according to an Iranian source.

Austria’s official credit provider for exports, the Oesterreichische Kontrollbank Aktiengesellschaft, will provide insurance for a €1 billion ($1.11 billion) investment in Iran-based projects, which contains the €780 million ($869 million)-rated slab facility, the source in Iran said.

The Austrian division of technology provider Primetals Technologies will help build the plant, Metal Bulletin understands.

When contacted, however, Primetals declined to comment on its involvement in specific projects.

“Primetals Technologies has started to serve the Iranian market [again] and has identified several business opportunities,” a spokeswoman for the company said on Saturday.

“We are working to support our potential customers with project financing, [but] nothing is finalized or can be shared for the time being.”

 Contested Reports

Iranian news sources first reported last week that a steel plant in Gol-e-Gohar was to be set up, but some reports were contested by sources who spoke with Metal Bulletin.

Certain accounts claimed that Austrian steelmaker Voestalpine was involved with the project, which was denied by the company.

It was also reported by certain Iranian news sources that Austrian Finance Minister Hans Jorg Schelling had confirmed the deal during his visit to Tehran last week, but Metal Bulletin understands from Austrian sources that Schelling did not raise the issue during his trip.

Although the Austrian government has distanced itself publicly from the Gol-e-Gohar project, Schelling wishes to increase bilateral trade with Iran to levels seen before international sanctions were imposed on the Middle Eastern country in 2006.

“It is important to be a door-opener and bridge-builder for Austrian companies and to work on eliminating technical hurdles,” Schelling said last week.

Since Iran signed its nuclear deal with the UN Security Council and the EU in January 2016, business relations between Iran and other countries have begun to thaw.

One part of this process was the decision by Austria’s Finance Ministry in 2016 to increase the liability limit for Austrian exports to Iran from €280 million ($312 million) to €1 billion ($1.11 billion), thus making deals such as the Gol-e-Gohar slab plant project possible.

“Austria’s economic interest in the Iranian market, which has enormous potential for Austrian companies with its more than 80 million inhabitants, is enormous. Austrian companies from a wide range of sectors are showing great interest [in Iran],” an OeKB spokeswoman told Metal Bulletin.

 Effect on Slab Markets

Slab capacity in Iran already outweighs hot-rolled coil capacity, leaving a glut of leftover material that can be exported.

Iranian steelmaker Mobarakeh Steel Company, and its subsidiaries Hormozgan Steel and Saba Steel, together can produce around 9.2 million tons per year of slab but only 6.2 million tons per year of HRC.

Iran’s semi-finished steel export volumes rose by 29% year-on-year in March-April 2017 due to the lack of local demand and higher local capacity, the Iranian Steel Producers Association said.

Therefore, any further domestic Iranian slab capacity would result in even higher pressure on global slab prices, which would fall particularly on suppliers from the Commonwealth of Independent States region and Brazil.

Export prices for CIS-origin steel slab have been under pressure in June due to low offers from Brazil and Iran.

A cargo of Iran-origin slab was recently heard sold to a buyer in Italy at $390 per ton CFR, while CIS mills would only be able to offer the material at $405-410 per ton CFR Italy when taking into account its FOB offer prices of $390 per ton.

Iran Slab Slab Prices Global slab markets Iran slab plant