پژوهشهای مدیریت عمومی (Aug 2020)
Value Chain Analysis of Iran Steel Industry: Combining economic analysis of value chain and material flow analysis
Abstract
Extended Abstract Abstract Iran has competency in the most important factors in steel production. According to the country's steel strategy plan, all the value chain of this industry shall develope in balance; so that the country can be self-sufficient on the supply of raw material and middle products. The methodology used in this paper is value chain analysis, which has combined material flow analysis with the economic dimension of value chain analysis during the years 1393-1396. First, the current value chain of iron and steel in Iran is mapped. Next, through using statistics on the annual production and sales in each loop of the value chain, the import and export statistics of various chain products, the flow of materials in the steel industry value chain is analyzed. Then, by economic analysis of the value chain, value added share of different stages and operating and overhead costs in each chain were identified. According to the findings, there is a significant inequality and inefficiency throughout the chain. And in all three years, the pelletizing was the bottleneck of chain balances. In addition, due to the difference between nominal capacity and actual production of pellets in 1393, about 400 billion rials, in the year 1394 about 1,000 billion rials, and in 1395 about 8,000 billion rials of added value that could have been created in the course of the value chain were lost. Introduction Steel industry as one of the basic industries of the country plays a significant role in value creation. Steel manufacturing in the world is mainly done in two ways: Blast furnace technology and scrap or DRI smelting in electric arc furnaces. The value chain of the Iran steel industry is unbalanced. This problem is raised in the supply of raw materials to factories. At the industry level, to reach effective policymaking and sustainable resource management, accurate information on material flow in different nodes of a chain is critical. Value chain analysis, in parallel, provides an opportunity to relate these flows to economic variables, so that concepts such as resource productivity and economic productivity can be described clearer. Case study The case study is Iran steel industry; In 2016, Iran, with a production of 17.9 million tons of crude steel by both blast furnace and direct reduction method, was ranked 14th in the world production of crude steel. 87.8% of the country's production is provided by direct reduction method and the rest by blast furnaces. Iran has competency in the most important factors in steel production. Materials and Methods Iran's steel industry regarding the share of the use of arc technology in steel production is unique. According to the Iran industrial policy, all the nodes in the steel value chain must be developed in a balanced way; this policy is also unique. Previous researchs have been done with the aim of increasing energy efficiency and reducing carbon dioxide production or modeling the amount of steel waste. We cannot refer to a detailed research on the subject of material flow analysis in the steel industry. The use of multiple sources of information on the flow of materials, accounting reports of various factories over the last three years, and the simultaneous use of material flow analysis and economic analysis of the value chain, is done for the first time. Methodology Material Flow Analysis (MFA) is a tool for analyzing the inputs and the outputs of material in an area defined by boundaries; whereas the boundaries can be set as a nation, an area or a company depending on what is to be analyzed. Value chain analysis (VCA) is a method for accounting and presenting the value that is created in a product or service as it is transformed from raw input to a final product consumed by end users. Research findings In order to analyze the flow of materials, World Steel Association report in 2014-2016, the import and export of various nodes in the value chain (based on the customs statistics of the Islamic Republic of Iran in the years 2014 to 2016), and Iran steel industry master plan report were used. Also, in value chain analysis, audited financial statements of Chadormeloo Co., GolGohar Co., South Kish Steel Co., Khorasan Steel Co. and Khuzestan Steel Co. have been analyzed. Based on the results of the research, the flow of metal of the steel production value chain was drawn during the years 2014 to 2016. In addition, the deviation of the actual production from the nominal capacity in the last three years was plotted in three graphs. (Collection of information and drawing of all diagrams have been done by the authors). Discussion and Results According to the findings, there is a significant inequality and inefficiency throughout the chain. Moreover, in all three years, the pelletizing was the bottleneck of chain balances. In addition, due to the difference between nominal capacity and actual production of pellets in 1393, about 400 billion rials, in the year 1394 about 1,000 billion rials, and in 1395 about 8,000 billion rials of added value that could have been created in the course of the value chain were lost. Conclusion Due to the difference between nominal capacity and actual production of pellets, an added value that could have been created in the course of the value chain was lost. In other words, despite the fact that the increase of production capacities was the main approach to the development of this industry in Iran, the country has not succeeded in implementing this strategy (quantitative development). The analysis of the value chain of the country's steel industry from the perspective of economic analysis of the value chain and the flow of materials provide an opportunity for policymakers to better understand the steel industry and the dynamic changes of different loops in the chain. By recognizing the bottlenecks of production and consequently, the roots of the inefficiency of the chain, the policymaker can design appropriate policies and interventions to upgrade the value chain.
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