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Analysis: New US sanctions seen having little impact on Iran steel exports, but will hit imports

London — The US' imposition Wednesday of new sanctions on Iran's metals and minerals trade may change little in the short term for Iran's steel exporters or their customers abroad, in a trade environment that has already been restricted by existing secondary sanctions and anti-dumping actions, according to Iranian and European steelmaking sources surveyed Thursday. Steel imports into Iran are however to expected continue to take a hit.

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The Iranians will attempt to continue exporting to neighboring countries in the Middle East and North Africa region in the case of steel products and to trade partners including China and India in the case of iron ore products, Iranian steel and iron ore sources said.

Despite the US' imposition of secondary sanctions since August 2018 on supply and trade of steel, aluminum, graphite and coal with Iran, "the [Iranian] steel industry has maintained its position in both production and export in the MENA, although we can't ignore the role of sanctions on technology transfer and cooperation of Iranian companies with their foreign partners," said Reyhaneh Sarlek, an Iranian steel market specialist.

FACTBOX: Little global impact expected from US sanctions on Iranian metals sectors

"Iranian metals have been under sanctions before, with some major manufacturers included in the sanctions list, so the new round of sanctions is a kind of psychological warfare against Iran," said Amir Hossein Kaveh, secretary of Iran's Syndicate of Steel Pipe and Profile Manufacturers. "In the face of previous sanctions Iranian manufacturers have developed new markets in south east Asia, and exports to neighboring countries has been increasing since then."

According to Asian sources, the secondary sanctions hit mainly trade of Iranian steel for use in the oil industry abroad. However, on Wednesday US President Donald Trump signed an executive order to impose more sweeping sanctions on Iran's iron, steel, aluminum and copper sectors -- which he described as "the regime's largest non-petroleum -- related sources of export revenue."

The US International Trade Administration's Globe Steel Trade Monitor report, published a year ago, classified Iran as the world's 18th biggest steel exporter. The Iranian Steel Producers' Association put steel products exports at 7.9 million mt in the last Iranian year (to March 20), a decrease of just 7.1% on the previous year, despite the secondary sanctions.

While some difficulties may now occur in transportation - including increased freight and insurance costs for those shipping companies that will still serve Iran - these are likely to be offset "by the high quality and cheap nature of Iranian products," according to Kaveh. Weakness of the rial since the secondary sanctions were imposed has reportedly aided exports.

Tommaso Sandrini, head of the steel group of Italy's Assofermet, said the metals trade group was "very concerned" about the effects of Trump's new wave of sanctions against Iran, even though

"As far as steel is concerned, the effects of the sanctions will be quite limited: AD (anti-dumping) duties already in place on HRC (hot-rolled coil) make Iran not a viable option for EU buyers, regardless of the new sanctions. Iran is already out of the import game for the most important steel product category," Sandrini said. "Despite that, the new sanctions will depress even more the global economic scenario, will relegate Iran out of the growth path of the emerging markets and will reduce confidence and trust. The sanctions themselves are not devastating for steel but they will contribute to dry up other business opportunities with a country that has always been a close partner for Italy."


Pipemaker Kaveh noted that Iranian manufacturers and consumers are likely to be impacted by the decline in steel imports that may come with the new sanctions, and that has already occurred as a result of the secondary sanctions. Imported products have benefited Iranian manufacturers' efficiency, Kaveh claims.

"Before the sanctions we used to import about 3 million mt of steel sheet annually and export the same amount but now this process has stopped and self-sufficiency is a necessity," he said. Late last year, Iran's total steel exports were put at some 4 million mt/year of products, lower than traditional levels.

ArcelorMittal, the world's biggest steelmaker, noted in its 2018 US Securities and Exchange Commission 20-F form that its Europe segment stopped selling steel flat products, coated and coated, alloy steel plates, sections, wire rod and seamless pipes both directly and indirectly for projects in Iran from June 2018, after generating $9.8 million in general sales revenue and an additional $2.54 million from automotive sector revenue from these sales in the January-June 2018 period.

ArcelorMittal's Dubai-based trading subsidiary, ArcelorMittal International FZE, AMID, has not had any direct or indirect sales to customers in Iran since November 2018, it said. AMID's sales to customers in Iran had generated $66.2 million in revenue in 2018, amounting to 4% of AMID's total sales last year it said. The company said its risk of doing business with Iran is not mitigated by the EU Blocking Regulation, passed by the European Parliament in August 2018 to protect EU citizens and governments from the impact of the US secondary sanctions.

-- Diana Kinch and Annalisa Villa,

-- Edited by Richard Rubin,