Industrial wheels and the basis of most manufacturing and service markets are based on the demand of raw materials. Raw materials or “basic materials” are substances essential for the production cycle. The demand for raw materials has always been a major challenge for producers all around the world. Islamic Republic of Iran despite having immense natural resources and being among 15 rich countries, has always encountered the problem of raw material deficiency in all industries and activities; whereas, According to the statistics, Iran maintains more than 10,170 mines until 2021, with only 6,861 active mines and 3,309 inactive mines.
This issue, regarding American and Europe Union (EU) embargo over Iran, has imposed many challenges on most Iranian industries. Although Iran is self-dependent in the supply of raw materials and resources for most of its domestic productions, signing foreign contracts and importing raw materials is basically the only solution for ensuring the demand for raw materials. This issue is a golden opportunity for foreign companies to earn significant income by signing import contracts, registering their agency, and manufacturing.
Deficiency of raw materials between significant obstacles for production
Even though the different parts of the Ministry of Industry, Mining and Trade of Iran are facing enormous difficulties, this ministry succeeded in prioritizing raw materials and eradicating the production obstacles, especially the commodities related to the welfare and maintenance of people. This issue points out the significance of the supply of raw material for different sectors of Iranian economy and its people’s welfare. In the meantime, the supply of raw materials of strategic and primary industries that supply the raw materials of other industries remains noteworthy.
Altogether, besides deficiency of raw materials, “production embargo”,” instability in macroeconomic”, ”high inflation”, “lack of appropriate liquidity”, “foreign embargo”, “smuggling’, and “attraction of non-productive markets” have been the most significant impediments to production in Iran. In this matter, the deficiency of raw materials is the most critical reason for reduction in manufacturing in Iran.
Reasons for deficiency of raw materials in Iran
There are many reasons for deficiency of raw materials in Iran. These reasons can be applied as a good clue and strategy for investment in supplying the raw materials for the Iranian industries. Generally, in addition to reasons such as covid-19 outbreak, US embargo, and excessive currency fluctuation, the most significant reasons are as follows:
- decrease in net/gross national production;
- using old knowledge and technologies;
- inadequate raw material supply policies; and
- selling the raw materials and exportation despite the local need
Challenges of deficiency of raw materials in Iran
Considering the current deficiency of raw materials in many industries and manufacturing companies, Iran is in danger of losing its global export markets. Iranian primary industries such as Steel and petrochemical, automotive, and plastic and textile industries are suffering from a lack of raw materials. For this reason, relying on local potential in many areas, this country tends to provide these raw materials, but this issue could not be implemented automatically and for 100% of the raw materials.
Challenges of deficiency of raw materials in Iran have caused many problems for domestic industries. These challenges brought about many problems such as a rapid increase in product prices and high inflation in the market.
Iran’s strategies to supply the raw materials:
The original and main strategy for resolving this problem, even though in the long term, according to the authorities and experts’ viewpoint, is to seek help from the private sector and rely on local potential. In fact, the private sector, with applying the knowledge of Iranian experts, can localize manufacturing technology, and they can take a huge step toward solving the problems that impede the supply of raw materials in Iran.
Another strategy for the Islamic Republic of Iran is to use the potential of signing import and export contracts to solve the deficiency of raw materials. The Iranian authorities will support and secure investments in the foreign sector.
Most essential areas face a deficiency of raw materials:
In this section of the attractive market of raw material, we will discuss the three most significant areas facing a deficiency of raw materials in Iran. The main areas that encountered raw materials deficiency in Iran include:
1: The deficiency of raw materials in the Steel industry:
The deficiency of raw materials is a chief challenge to the Steel industries in Iran. This difficulty will expand Iran’s need for discoveries and import of raw materials, where foreign companies can make successful investments in both areas. Iran is currently facing difficulty in supplying raw materials such as iron ore, concentrate, and conglomerate. Besides, liquidity issues and limited capital flow in Iran is an exceptional opportunities for foreign investors to have an effective presence in the attractive market to supply the raw materials for the Iranian Steel industry.
Given the importance of this industry and its high profitability, foreign companies with investment in discoveries, selling equipment and modern technologies along with contracts to export raw materials for the steel company, can earn an excessive income. The supply market of raw materials is extensive and the following preliminaries are the top areas for investment in this industry:
- Selling equipment and new technologies related to mining;
- selling modern technical knowledge;
- Trading raw materials directly; and
- Marketing energy control technologies for industrial companies.
2: deficiency of raw materials in the petrochemical industry
The deficiency of raw materials in the petrochemical industry has led to substantial competition for the supply of raw materials in Iran’s commodities stock exchange, so the price of raw materials has increased considerably, and consequently, the value of products increased. Referring to Iran’s statistics in 2021, petrochemical plants are performing at half of their capacities. The excessive export of raw materials needed for these plants is the major challenge that this industry is facing.
According to the statistics published by the authorities, almost 60% of petrochemical-related plants have been closed, and a major part of the rest are currently operating with 10% to 30% of their capacities. This was due to the persistent economic recession and the deficiency of raw materials.
Regarding the extensiveness of the petrochemical industry in the Islamic Republic of Iran, foreign firms can use the profitable market by investing in the supply of raw materials to this industry.
3: deficiency of raw materials in the textile industry:
Another industrial section facing huge raw material deficiency in Iran is the textile industry. The basic raw materials applied to this industry are as follows:
- Natural fibers, including wool and silk
- Natural fibers with herbal origin like cotton and linen
- Mineral fibers such as asbestos
- Artificial fibers, including polyester and acrylic.
The textile industry requires natural cotton and petrochemical substances as the two primary raw materials required for manufacturing its product. The net cotton harvest rate in Iran in recent years has been almost 50 to 60 thousand tons per year. This amount will not meet the demand of 200 thousand tons of cotton for the textile industry. This issue could illustrate the capacity of cotton export and raw materials of textile industry.
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GTG trading company, with precise and up-to-date identification of Iranian market, will provide you the essential and applicable information for trade with Iran. To acquire more information and receive professional counseling in all areas related to the trade with Iran, mainly export and investment in this country, contact the GTG experts.
