Iran is now the new land of opportunities. With a young, well-educated and economic labour force, and diverse manufacturing base, Iran offers great market entry opportunities like never before. Demand is expected to increase in sectors including O&G, Automotive, Metals & Minerals, Infrastructure, Energy, Telecom, Aviation, Consumer Goods and Real Estate. To achieve all goals of Iran’s Outlook 2025 and significantly cut unemployment rate, the country requires 100 to 120 Billion investment every year, of which the about 30 to 50 billion is expected to be financed through foreign investors. In all, Iran is looking to attract at least USD 300 billion in the next ten years.
For instance in the mining sector, the country targets about USD 20 Billion foreign investments for exploration, project development, equipment and mining renovation and related infrastructures by 2025.
Currently, Iran is the largest steel producer in the MENA and is amongst the 15 largest producers in the world. Even with significant domestic production capacity, Iran remains a net steel importer. Over 50 percent of downstream industries are currently non-operational, or unable to operate at optimal capacity. This has led to a high demand, low supply situation. It is estimated that the country imports around 8 Million Tons of steel every year, mainly from China and Turkey.
About 90 percent of Iran’s steel production is based on natural gas technology. The steel industry is currently in need of coaling coke, Direct Reduced Iron (DRI) sponge, and scrap. Iran needs to triple its installed capacity of iron ore concentrate and pelletizing plants, as well as sponge iron to meet demand.
In the current post-sanction era, Iran’s top priority would be to rebuild its outdated infrastructure – transport, housing, construction, railways, water treatment plants, and ports. Without this basic infrastructure, the country will find it difficult to achieve its ambitious goals. Steel is an important component of infrastructure. This gives great opportunities for the world to sell finished steel in the local market. The per capita consumption of total finished steel in the country is estimated to have risen from about 199 Kg in 2006 to about 279 Kg in 2015. The next decade is expected to boost demand for steel across its value chain, as the government places impetus on nation building. In order to achieve its steel goals, the pace of infrastructure development needs to be stepped up.
Construction: According to Project Iran, construction has a project pipeline worth more than USD 200 Billion, for housing, energy and transport infrastructure. The country’s construction sector witnessed a steady annual growth of 4.2 per cent in 2014 and 475 construction tenders worth USD 88 Billion were awarded. The value of construction to be awarded in 2016 is expected to reach USD 154.4 Billion. The Government through initiatives such Mehr Housing Schemes is planning to build 4 Million new residential units.
Aviation and Infrastructure: There are also plans to expand Iran's main airports, with the Iranian Airports Holding Company requires more than USD 20 Billion investment for development of the aviation sector. A number of railway infrastructure projects have been announced that will connect Iran to other countries. Currently, the average cost of iron ore production is not competitive with countries like China, Brazil and Australia. This is mainly because of an improper transportation network. Obsolete technologies have made mining and transport difficult, as in the case of sponge iron. By 2025, railway networks needs to grow at CAGR 11 percent (currently is not more than 3.7 percent). Roadway network has to grow to at least 3.2 percent CAGR. Ports and cargo capacities need to be tripled and loading/unloading capacities have to be developed to about 400,000 Tons.
Energy: There is an urgent requirement for water desalination plants as renewable energy and water supply source. Iran has faced a severe shortage in this sector. Power generation needs to grow at 23 percent CAGR up to 2025 for the country’s steel goals to be achieved.
Automobiles: The largest vehicle manufacturer in MENA, it currently relies on imports of critical components such as pistons and cylinder heads. The Government recognizes the impact of the automobile sector on the economy. It plans to increase production capacity to three million automobiles a year by 2021.
The country must adopt effective and practical solutions to remove investment barriers, increase privatization, utilize proper customs duty regime to decrease the negative impacts of dumping, support investors by subsidized long-term loans, develop required infrastructure especially desalinated water and green power, and identify strategic locations for new investment. Regarding downstream projects, Iran would now need to strategically identify feasible locations to cut feedstock transportation cost. Iran has a number of smaller capacity iron ore mines, where it is not feasible to operate individual processing plants. But through centralization and capacity utilization of these individual capacities via a central management, the country can increase processed iron ore output. Many iron ore mines have low iron grade reserves – proper, up-to-date technology will help in increasing efficiency. To extract and develop iron ore concentrate and pellets and reach its target of 55 Million Tons of crude steel production, it requires an investment of USD 20 to 30 billion.
Despite challenges, Iran is expected to revert to steady growth in the next three to four years. The National Development Fund of Iran (NDFI), which is in charge of industrial investment financing, is focused on export oriented project development. These are aimed to include alloy steel products, wire, and sheets. With the necessary policies in place, and the government’s bid to invite tenders from various countries to invest in Iran, the country is expected to get closer to its set targets by 2025. Once fresh financing is injected into Iran and construction activity is resumed, the per capita steel consumption is expected to increase by 25 to 30 percent in five years.
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