The downstream aluminum industries are currently working at half their capacity.

Metal industries account for a major portion of Iran’s fast-growing industrial sector. The aluminum sector, likewise, plays a crucial role in developing metal industries. Iranian aluminum industry is one of the largest in the region.
To get first-hand information on the latest situation of the aluminum market and its production capacity, the Persian weekly Barnameh interviewed secretary of Iran Aluminum Industries Syndicate, Hossein Rezaei.
Excerpts of the interview follow:

Tell us briefly about the syndicate.
Iran Aluminum Syndicate began its work following the 1979 Islamic Revolution under the name of Aluminum Council. It later became the Association of Aluminum Industries before acquiring its present name of Iran Aluminum Industries Syndicate.
The main aim of establishing this syndicate, in addition to economic and industrial issues, was to create an ’executive arm’ for the national aluminum industry, whose members were both the producers and consumers of the product.
In recent years, members of the syndicate have performed successfully and managed to save several aluminum production units from bankruptcy. They have also offered valuable advice to the country’s industrial officials on aluminum-related issues.
Major state-run factories like Arak, Alumtech and Almahdi are some of the biggest members of this syndicate. These factories are in charge of supplying a major portion of national demand for aluminum.
There also are several small production units, which are represented at the syndicate. The syndicate has 32 members, which produce 97 percent of the country’s aluminum.

What has the syndicate done to organize the market?
Since aluminum production is limited, its consumption should also be regulated in a way that domestic supply and imports are balanced.
The syndicate adopts certain strategies in this respect. These strategies are used by the Organization for Protecting the Rights of Consumers and Producers and the Ministry of Industries and Mines.
The syndicate collects and analyzes data on production, distribution and consumption of aluminum from the producers. The results of these analyses and evaluations are used for regulating the market.
Both the producers and the consumers report to the syndicate of any market irregularities. Hence, the syndicate is always well-aware of the latest market situation. It helps develop the market and overcome the shortcomings by facilitating import of raw materials and helping exports.
In the past few years, the industry has managed to manufacture 500,000 tons of aluminum products per annum. However, (raw) aluminum production remains low. Iralco, the largest aluminum factory, manufactures 120,000 tons at present, while Almahdi, which produces 110,000 tons, exports a major portion of its produce due to its huge debts. Iralco also exports its aluminum production due to certain problems.

In the past few years, aluminum industry has produced 500,000 tons of various items per annum.

Is it true that the syndicate has no representative at Tehran Metals Exchange?
We are not represented on the Presiding Board of the Tehran Metals Exchange (TME). The syndicate does not have a brokerage firm at the exchange either.
But I think the problem lies in the poor structures of the TME. For instance, at the Tehran Stock Exchange, the shareholder’s links with the brokerage firms continue, since the same shares return to the bourse, whereas regarding goods, they are not traded again at the TME as they are consumed somewhere else after the trading.
One way to solve this problem is to reform the TME structures. It is not within my domain to tell what should exactly be done. But if we are looking for a metals exchange that can operate in accordance with the international markets, we will have to lift import duties and let metals be imported freely. Restrictions imposed on import of metals have given rise to multiple prices.
Small industrial units are the major consumers of aluminum. Many of them need to purchase less than five tons of aluminum, whereas the TME does not sell less than 20 tons in each deal.

How is the aluminum market doing at present?
The downstream aluminum industries are currently working at half their capacity. The national demand for aluminum stands at 260,000 tons per annum, whereas supply does not exceed 220,000 tons. The rest is imported from Bahrain, Tajikistan, India and Romania.
The ground has been prepared for increasing aluminum production capacity to 500,000 tons per annum. But we need to employ modern technologies to realize this goal.
Since the collapse in the early 1990s of the former Soviet Union, domestic aluminum industries have purchased second-hand machineries from the former Soviet republics, which were outdated even at the time of purchase.
The downstream aluminum industries have to be renovated, should the national demand for aluminum products used in automotive and construction industries be met entirely.
This is while private sector industrial units cannot afford to renovate their equipment. On the other hand, bank profit rates are too high.
I believe that if foreign investors are not participating in our aluminum projects, the government should fund efforts to develop the industry. We have now managed to supply a major portion of our raw material requirements domestically and have purchased the related know-how from China. The only thing that remains to be done is that the government must throw its support behind the industry to avoid wastage of resources.

The decline in Iran's share prices over the past seven months of the current year has been around 18 percent

The slide in share prices at Tehran Stock Exchange (TSE) has reached a point where it might edge past the necessary or periodical adjustments, which are always implemented in international stock markets, according to Donyaye Eqtesad.
Efforts by officials to calm down the situation in the capital market in recent days have not been successful and their words and promises have not been able to comfort those who have lost their capital in the market.
The deputy minister of economic affairs and finance has been commissioned by the government to introduce reforms in the stock market. He has also been enjoined to return share prices to their normal level. He has appointed a new secretary-general for the stock market Ð a person who appears only interested in the quality of the stock market rather than its quantity.
The developments leading to a change in the secretary-general of the Tehran Stock Market, has led to the periodical adjustment of share prices. It should also be noted that foreign policy issues and the country’s nuclear showdown with the West had exacerbated the existing crisis in the stock market.
The recent developments in the Iranian stock market have likewise been experienced in other countries. Therefore, using the experiences of others in dealing with the issue of periodical adjustment could prove useful for the Tehran Stock Exchange.
However, before doing so, it is necessary to point out an important matter as regards the culture of shareholdings in Iran.
The culture of shareholdings in Iran has not been institutionalized properly yet. Iranian shareholders should be aware that in all stock markets across the globe, share prices are being corrected periodically. The world’s biggest stock market, i.e., New York Stock Exchange, adjusted its share prices in the year 2000. Shareholders in that market are still bitter about the results, which led to well over 50 percent reductions in average share prices.
In addition, share prices of many Internet companies went down to zero and now after four years the index price of NASDAQ has remained around 40 percent since 2000. Dow Jones price index likewise has been increased by about 20 percent in order to reach its former rate of four years ago.
The decline of Iran’s share prices over the past seven months of the current year has been around 18 percent, as the index went down to 10,170 from the previous 12,500.
Any type of investment, including in bonds, is indeed risky. There is no such thing as risk-free investment in the world. Any expectation of continuous and non-stop increase in share prices of stock market is wrong as well. This is a point which should be clearly explained to investors and shareholders by those in charge of the stock market.
Periodical adjustment of shares is part and parcel of stock market deals. All countries have experienced periodical adjustment of share prices, particularly after their capital market has experienced a boom. Economic officials in these countries are not worried about adjustments. They are only concerned about the time when these adjustments are going to exceed a logical level.
Many economic experts working closely with the stock market are of the opinion that periodical adjustments are necessary in order to prevent bubble prices in prosperity periods.
For the same reason, intervention by economic officials should be only limited to prevent excessive collapse of share prices in times of crisis and also to help strengthen share prices, so as to bear the negative pressure in the market.
In other words, the officials should be concerned about two groups of shares: the ones which are the main goal of adjustment and correction in the market because their prices have exceeded a logical limit and must be reduced, and the other which have collapsed alongside the first group as a result of the falling prices of shares. In circumstances as such, the only solution would be for companies to re-purchase their own shares.
In the developed stock markets, announcement of re-purchase of shares by their own companies is accompanied with the return of independent buyers and as a result, increase in share prices. Concerned Iranian officials should apply such a practical method in moments of crises.
The entry of charity organizations and banks, which have no idea about the structure of stock markets, could also undermine share prices, particularly when they do not have the permission to participate in the market as per its regulations.
It is therefore necessary for banks to offer assistance to companies whose real and long-term share prices are greater than the existing financial and accounting standards.
Parliament at present is busy introducing reforms in the capital market law. Such a basic measure, however, is taking place at a wrong time, and to make matters worse, it will become operational only after six months.