As an intermediary link between iron ore mining and steel production, direct-reduced iron (DRI) is a critical piece of Iran's goal to become a major player in steel exports.

Contributing 16 million tons to the global output of 72.76 million, Iran is one of the leading producers of DRI, according to Midrex's 2016 World Direct Reduction Statistics report. These estimates place Iran second only to India, and later figures from World Steel put Iran in first place for DRI production in the first five months of 2017.

In the production of steel, iron input requires processing in one of two main forms: blast furnace or direct reduction. While China—a growing iron and steel producer—mostly utilizes blast furnace iron in its steel production, Iran heavily relies on DRI. In 2016, Iran only produced 2.25 million tons of blast furnace iron, roughly one-eighth of its DRI production. Because the direct reduction process uses natural gas, another commodity in which the country has a competitive advantage, this process is especially ideal in Iran.
Iran's Mobarakeh Steel Company (MSC) is the largest DRI producer in the world, and the MENA region, by far, is the greatest producer of DRI. MSC is also the region's biggest steel producer. At the national level, Iran's annual steel output reached 17 million tons, and, by the end of the Iranian year, March 2017, MSC's steel production rose to 10.3 million tons.
Iran plans to more than triple steel production to 55 million tons by 2025. According to Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), the state-owned, mining-sector holding company, 14 million tons of that will be for export. IMIDRO and its subsidiaries are aiming to improve international relations so as to increase exports, particularly in steel. Exports to the EU increased to over 1 million tons in 2016.
Esfahan Steel Company (ESCO) exports mostly to China, and though exports slowed overall due to political circumstances, the company is looking to increase exports again following the lifting of sanctions. In an exclusive interview with TBY, ESCO Managing Director Ahmad Sadeghi explained that the key to rebuilding export capacity is having “long-term contracts in place for our raw material supplies.”
As iron ore in its raw form is abundant and increasing in Iran, the industry is poised to fulfill this requirement. The Deputy Minister of Industry, Mine and Trade, Mehdi Karbasian, detailed to TBY the country's mining reserves and exploration plans. IMIDRO has started 250,000sqkm of exploration work. Karbasian said, “Right now, Iran has more than 57 billion tons of potential mining reserves, and 3 billion of that is iron ore.”
Another requirement for Iran to reach its steel production goal is investment. Mahan Sepahan, another Iranian steel company, is looking at foreign companies to finance some of the huge investment requirements for the mining industry, and specifically the steel sector's, expansion. These needs were also echoed by the Deputy Minister.
Transportation networks are both an obstacle and an opportunity for Iran's steel sector. In IMIDRO's January-February 2017 newsletter, Karbasian described incomplete transport networks and infrastructure as the second main concern for industries in Iran after financing. In response, ESCO has diversified its production capacities to include rail products with the opening of its new plant in 2016. The company dedicated 400,000 tons of steel toward the production of 6,000km of advanced rails for the government.
This opportunity provides a two-fold benefit. Rail expansion will require more steel products themselves, and the railways will increase export possibilities for the entire mining industry. The North-South Transport Corridor offers significant opportunity for Iran as the multi-modal network of ship, rail, and road routes move cargo between India, Iran, Central Asia, Russia, and Europe.
The increased, mostly foreign and infrastructure-related, demand for steel products requires augmented upstream inputs such as iron ore and DRI. With the desired investment and transport improvements, Iran has its eyes on the whole supply chain and has the potential to reach its 2025 vision for steel production.