Iran's steel transformation starts inside the old plants, not in new ones

Reza Mousaei — a specialist in mining industries and industrial development — told ISNA, discussing the reconstruction of the country's damaged industries for the post-war period: when people speak of rebuilding Iran's steel industry, many look towards building new plants and expanding production capacity around the country. The reality is that the starting point for this transformation lies elsewhere: at the heart of two large groups, Mobarakeh Steel and Khuzestan Steel. These two companies not only account for a major share of national steel output, they also represent the current generation of Iranian steelmaking technology.

He added: the global steel industry is entering a new phase, one in which traditional advantages such as access to cheap energy are no longer the main determinant of competitiveness. International reports, including those from the OECD, show that the future of the industry will be shaped by higher productivity, technological innovation and lower carbon emissions — and in those conditions, relying on past advantages cannot guarantee future success.

The mining industry specialist noted: Mobarakeh Steel, as the country's largest steel producer, relies mainly on natural-gas-based direct reduction technology. Although this is less polluting than coal-based routes, it is still considered a high-carbon technology under new global standards. Moreover, dependence on natural gas has increased production risk in a country that faces energy supply constraints every winter.

Mousaei said: Khuzestan Steel faces a similar challenge. Its dependence on cheap but unreliable electricity and gas has meant capacity reductions or production halts during peak-demand seasons. As a result, an advantage that was once a strength of Iran's steel industry has today become one of the factors limiting its growth.

He continued: Philippe Aghion's theory of "creative destruction" offers a useful framework for analysing the future of Iran's steel industry. Under that theory, firms are not necessarily driven out of the market by price competition; they decline when the rules of the game change and they cannot adapt. In steel, the new rule is low-carbon production and the move towards green steel.

The industrial specialist warned: if Mobarakeh Steel and Khuzestan Steel do not begin the process of technological transformation and carbon-footprint reduction now, they will face serious constraints in export markets in the years ahead. Carbon taxation in Europe, tighter environmental rules in regional markets, and international projects requiring environmentally certified steel are all signs that the rules are changing — and companies unable to align with the new standards will gradually drop out of the competitive cycle.

Mousaei added: one of the most serious policy errors in such conditions is trying to preserve the status quo through energy subsidies and short-term support. Global experience shows that supporting old technologies instead of investing in innovation merely postpones decline and raises its eventual cost. If national resources are spent maintaining current structures without the investment needed to transition to new technologies, Iran's steel industry risks losing both domestic and foreign markets.

"The right path is green reconstruction and a technological leap. That transformation should begin with the development of green-hydrogen-based technologies — the route many of the world's leading steel nations have chosen as their main path to cutting carbon emissions." — Reza Mousaei

He stressed: harnessing Iran's extensive solar energy potential could enable green hydrogen production and reduce the steel industry's dependence on fossil fuels. Alongside this, establishing carbon-footprint measurement and monitoring systems and obtaining international environmental certification is essential. In the near future, access to many global markets will not be possible without such certificates. Attracting investment for these transformative projects also requires a clear outlook on access to renewable energy and participation in low-carbon export markets.

Mousaei said: the importance of this transformation becomes clearer when the country's development needs are considered. In the coming years Iran will need substantial volumes of steel for infrastructure, housing, roads, power plants, refineries and new industries. If domestic steel production remains constrained by energy limits and ageing technology, either development projects will face steel shortages or the country will be forced to import low-carbon steel — a path that would impose heavy costs on the economy.

He said: by contrast, beginning green reconstruction at Mobarakeh Steel and Khuzestan Steel could turn these two groups into the principal suppliers of low-carbon steel for national projects. Beyond meeting domestic demand, a return to export markets and sustainable foreign-currency earnings would be further gains from this transformation.

The industrial specialist concluded: on this basis, the future of Iran's steel industry depends more than ever on the decisions taken today. Mobarakeh Steel and Khuzestan Steel must either take the path of going green and renewing their technology, becoming players in the new generation of the global steel industry, or, by continuing to depend on past models, gradually lose their position in regional and global competition.