To bolster local producers, the KRG Ministry of Trade is calling on the Finance Ministry to double tariffs on steel products.
There are five factories in the Kurdistan Region and two in Iraq that produce steel used in concrete structures. They together produce around 1.910 million tons of steel annually. Of this amount, 1.460 million tons are produced in the Kurdistan Region.
Demand for steel in Iraq and the Kurdistan Region varies according to the security situation, budget allocations for constructions projects, and peoples’ income.
According to figures compiled by Kurdistan Region’s Ministry of Trade and Industry, nearly 1.420 million tons of steel were used in Iraq and the Kurdistan Region in 2016. Of this, nearly 330,000 tons were produced by local factories and 1.9 million tons were imported.
Last year, the use of steel dropped to nearly 1.41 tons, yet local production increased to nearly 430,000 tons and imports rose to nearly 980,000.
In the past 11 months, nearly 1.84 million tons of steel were used. Of this, 870,000 tons were produced by local factories and nearly 970,000 tons were imported.
Iraq’s demand for concrete reinforcing steel is projected to hit 2.4 million tons in 2020 for post-ISIS reconstruction and local factories are projected to produce 1 million tons of steel.
There are nearly 65 companies in the Kurdistan Region that import concrete reinforcing steel. They import nearly one million tons of concrete steel from Turkey, Iran, and Ukraine every year.
“Companies associated with Galiawa Group import nearly 350,000 tons of steel from Iran annually, and nearly 50,000 tons from Turkey and Ukraine. We export some to Iraq, some to Syria, and some to the Kurdistan Region,” said Shwan Mohammed, general manager of Galiawa Group Companies for cement and steel imports.
“Kurdish traders account for nearly 85 percent of Iraq’s demand for concrete reinforcing steel. They even export steel to Syria,” he added.
Following a drop in the value of the Iranian currency and subsequent drop in the price of Iranian steel, the KRG Ministry of Trade and Industry suggested that tariffs on the import of one ton of steel be raised from 50,000 dinars to 100,000 dinars to protect local industry. The Ministry of Finance implemented the policy on November 16, 2018.
“Increasing tariffs might affect the export of steel through the Kurdistan Region’s crossings to Iraqi cities. This is a good decision protect local products, develop factories and strengthen Kurdistan’s economic infrastructure,” said Samal Abdulrahman, general manager of Kurdistan Region’s customs points.
“The Kurdistan Region was previously making nearly $80 million in steel trade and has now lost nearly 85 percent of this revenue due to increased tariffs. And this is because traders are currently importing steel from Turkey and Iran through Iraq and Syria. For example, if we want to import steel from Iran to Erbil, we import through Munzaraya crossing because the Iraqi government charges 80,000 dinars for a ton of steel,” Shwan Mohammed said.
“Because of increased tariffs, steel imports have decreased. For example, if 1,000 tons of steel were imported through Haji Omaran crossing to Syria daily, it has now dropped to 25 to 50 tons,” he added.
Turkish steel imports through Ibrahim Khalil have also dropped. Kurdish and Arab traders import concrete reinforcing steel to Mosul though Basra rather than Ibrahim Khalil Gate because the tariff is 20,000 dinars less and transportation from Basra to Mosul is nearly 10,000 less as well. Transportation is cheaper too because trucks in Basra are allowed to carry a load of 50 tons, but are allowed to carry no more than 30 tons in the Kurdistan Region.
“We called for tariffs on concrete steel, especially Iranian steel, to be increased because more and more steel was being imported to the Kurdistan Region. The price of steel dropped after the value of toman declined. We have promised the Ministry not to raise the price of steel,” said Othman Qadir, manager of Sulaimani Steel Factory.
“Our sales are very low now because of Turkish and Iranian imports. Currently we have nearly 35,000 tons of concrete reinforcing steel in our warehouse and there is no one to buy it. The majority of other factories have the same problem. This is while the price of our steel is cheaper than Turkish steel by $70, but is more expensive than Iranian steel by $20,” Qadir said.
All steel factories in Iraq and the Kurdistan Region rely on scrap metal. Only Mas Factory in Sulaimani province depends on sponge iron and scrap.
Iraq and the Kurdistan Region prevent the export of scrap in a bid to help local factories produce steel. That is why the price of scrap has risen in Iraq and the Kurdistan Region to $170. This has served the interests of local companies, allowing them to compete with Turkish and Iranian steel in price.
“Twenty-five percent of the scrap we purchase will become waste and the price of oil and electricity here is higher than in Iran and Turkey. For example, the government was previously charging 20 dinars for one kilowatt of electricity, but is charging 100 dinars nowadays. One ton of black oil in Iraq is for 100,000 dinars, but is for $360 here. That is why we make less than $40 in producing one ton of steel rods,” Qadir said.
According to investigations conducted by the KRG Ministry of Trade and Industry, steel factories will encounter problems in the coming years because of declining scrap supply in Iraq and the Kurdistan Region.
Iraq and Kurdistan Region are projected to have nearly 700,000 tons of scrap iron in 2019. This amount will increase to 760,000 in 2020, and will drop to 440,000 tons in 2021. This will create problems for local steel factories.
