In this presentation I'd like to express Metal Expert's view on Iranian steel export potential and its production cost in comparison to major competitors in the region.

1. Iran steel export: perspectives and
competitiveness in the MENA region
2nd Iran Steel Export Perspectives Conference
September 4, 2015, Istanbul, Turkey
Andrey Pupchenko,
Deputy Managing Director,
Metal Expert

2. Contents
I. Iran’s export in post-sanctions era
II. Square billet as the most promising product now
III. Competitiveness in the MENA region

3. I. Iran’s export in post-sanctions era

4. Iran in post-sanctions era – steel export opens first
Now depressed domestic demand, limited export activity
1
st
stage Iranian banks get access to SWIFT
2
nd
stage
new players get access to international markets, export is the
top priority, as weak currency made export very competitive,
earn money first!
3
rd
stage
oil & gas industry recovery provides solid demand for tubes and
sheet products at home
4
th
stage
economy speed up with massive improvements in construction
industry and steel demand
5
th
stage import of downstream value-added products grows
© Metal Expert

5. IMIDRO expects Iran’s export to double in 2015
1
2
4
0
1
2
3
4
5
before 2014 2014 2015
© Metal Expert

6. in million t
Total 4 Mt
Khouzestan Steel Company 1.5 Mt billets and some slabs
Mobarakeh Steel 2 Mt flat products
other producers – Esfahan
Steel, etc.
0.5 Mt mainly billets
The number of Iranian exporters is still limited in
2015
© Metal Expert

7. Capacity in 2015 9.4 Mt
incl. IMIDRO
9.3 Mt
(80% utilization)
incl. independent 0.1 Mt
Export in 2015
about 2 Mt
(mainly in the form of flat
products)
Idled capacity - export* not to grow further?
Export of slabs does not seem to grow further
* - Metal Expert estimates
© Metal Expert

8. Capacity in 2015 14.5 Mt
incl. IMIDRO
6.3 Mt
(80% utilization)
incl. independent/private
8.2 Mt
(about 50% utilization)
Export in 2015 less than 2 Mt
Idled capacity - export potential* around 4 Mt
Square billets in Iran – there is some potential here
* - Metal Expert estimates
© Metal Expert

9. © Metal Expert
New steelmaking capacity 1.650
New rolling capacity 0.5
Billet surplus 1.155
Million t
Iran may be able to export additionally around
1.2 million t of billets in two years

10. II. Square billet as the most promising
product now – fundamental shift

11. What creates new opportunities and
disadvantages in global billet market?
• The end of 'super cycle' era
• Scrap price decreased much less comparing to iron ore
• Chinese billet export considerably increased

12. 'Super cycle' in raw materials comes to an
end as iron ore price loses 2/3 of its value
© Metal Expert
0
2
4
6
8
Oct.99
Aug.00
Jun.01
Apr.02
Feb.03
Dec.03
Oct.04
Aug.05
Jun.06
Apr.07
Feb.08
Dec.08
Oct.09
Aug.10
Jun.11
Apr.12
Feb.13
Dec.13
Oct.14
Aug.15
Ferrous scrap, Turkey, c&f from USA
Iron ore concentrate (61.5%), China, c&f from AustraliaOct.99=1

13. Scrap price decreased much less comparing to
iron ore as recyclers overinvested
© Metal Expert

14. Relatively high scrap prices reduces EAF-based
mini-mills competitiveness over steelworks
© Metal Expert
Source: World Steel Markets, Metal Expert estimates
200
250
300
350
400
450
500
550
Jan.13
Mar.13
May.13
Jul.13
Sep.13
Nov.13
Jan.14
Mar.14
May.14
Jul.14
Sep.14
Nov.14
Jan.15
Mar.15
May.15
Jul.15
$/t
Square billet cost (EAF steel) dynamics in Turkey
Square billet cost (BOF steel) dynamics in Ukraine (ArcelorMittal Kryvyi Rih)

15. Weak local market forces Chinese steel
companies to boost exports
© Metal Expert
0
20
40
60
80
100
2013 2014 2015*
milliont
long products flat products steel pipe
* - Metal Expert's forecast

16. III. Competitiveness in the MENA region

17. 2 major trends in billet market:
I. Mini-mills install EAFs (as heritage of old strategies –
before 'super cycle' came to an end)
II. Square billet replaces ferrous scrap at existing mills,
i.e. billet consumption rapidly expands
© Metal Expert

18. © Metal Expert
Billet demand estimated by Metal Expert (on the assumption
of 100% rolling capacity utilization); million t
Merchant billet market to expand in MENA
Source: World Steel Markets, Metal Expert estimates
2014 2015 billet market
expansion
new billet
capacity
2016
Total 8.6 11.2 2.6 0.1 11.1
Turkey 3 5.3 2.3 1.0 4.3
North Africa 3.4 3.7 0.3 -0.9 4.6
GCC 1.2 1.2 0 [3] 1.2
Other 1.0 1.0 0 [1.4] 1.0

19. Turkey
47%
North Africa
33%
GCC
11%
Others
9%
Turkey
35%
North Africa
39%
GCC
14%
Others
12%
In 2014 billet import
was 8.6 Mt
In 2015 billet import
is expected to be
11.2 Mt
© Metal Expert
Turkey's billet import to grow this year

20. Square billet replaces ferrous scrap in Turkey
© Metal Expert

21. Square billet (rebar) production costs of main
suppliers in MENA
© Metal Expert

22. Conclusion
• After sanctions removal, Iran will begin to expand export,
mainly square billets
• Billet demand from mini-mills is growing around the world
and in MENA, in particular, due to overvalued scrap prices
• Iranian steel companies, with its own DRI, has the lowest
cost in the region

23. What it is about
• New billet importers in the region, changes in market structure
• Estimates of billet consumption in the whole region, by
countries and by new re-rollers
• Competitiveness analysis: comparison of billet production
costs of main exporters into the region and local suppliers
• Comparison of rebar cost produced from different semis and
raw materials (i.e. CIS-origin billets, Chinese-origin billets, the
US and European scrap, HBI/DRI)
• Forecast of billet export into the region by CIS and Chinese
producers
• Three-month price forecasts for billets in main importing
countries (Turkey, Saudi Arabia, Egypt)
Metal Expert provides exclusive data and analysis
in new report MENA Billet Markets
Subscription fee - $1350
Subscription department
+38 056 239 88 50,
+38 056 370 12 06,
+38 056 370 12 07
subscriptions@metalexpert-group.com MENA Billet Markets is published twice a month
Exclusive statistics
• Steel-melting and re-rolling capacities in
MENA
• Square billet export by CIS plants
• Turkey billet market structure
• GCC billet market structure
• Egypt billet market structure

24. Thank you for your attention