From POSCO to L&T, Asia Inc looks to post-sanctions Iran for demand spurt
From steelmakers to construction firms, industrial companies in Asia hope an end to sanctions in Iran can provide a new source of sorely-needed demand.
South Korean steelmaker POSCO has been in touch with Iranian firms seeking to do business with it once sanctions are lifted, and Indian industrial conglomerate Larsen & Toubro (L&T) is eyeing opportunities in oil and gas extraction projects following Tuesday’s nuclear deal.
Lifting sanctions could keep a check on oil prices, to the benefit of big Asian energy importers China, Japan, India and South Korea, while a stronger Iranian economy, with a population of some 80 million, would provide a new engine of demand for Asian-made goods – from smartphones and TVs to cars.
For South Korean builders such as GS Engineering & Construction Corp, a deal would give a lift for a sector buffeted by sluggish demand in the Middle East, the industry’s biggest market.
Shares in GS E&C, which walked away from a $1.2 billion project in Iran five years ago as sanctions escalated, gained nearly 5 percent on Wednesday, and South Korea’s construction index ended nearly 3 percent higher on hopes the Iran deal will generate new business.
“When the Iranian nuclear agreement is reached and sanctions are lifted, we plan to actively re-enter Iran’s construction market,” said Huh Tai-youll, a GS E&C spokesman.
Even though companies such as Samsung Electronics and LG Electronics have continued to sell products in Iran, South Korean exports to the country fell to $4.16 billion last year from $6.26 billion in 2012, according to the Korea International Trade Association.
Kwon Oh-joon, CEO of POSCO, which has been battered by sluggish global demand, said Iran was once a significant market for its steel products.
“A few steel companies in Iran already contacted us if we can provide steel production technology,” he said after the company reported quarterly results on Wednesday. “We are looking for ways to improve POSCO’s financial structure while playing a role in reviving the Iranian steel industry.”
POWER, PORT PROJECTS
India’s Tata Power and Adani Enterprises , respectively eyeing a power project and a port project, sent officials to Iran last month to meet with industrialists and officials, said a senior Indian embassy official in Tehran. Adani declined comment and Tata Power did not respond to requests for comment.
Shares in India’s Aban Offshore, which earns a third of its revenue from Iran, jumped more than 16 percent on Tuesday and another 2 percent on Wednesday, while National Aluminium Co gained 2 percent on Wednesday after media reports said it planned a $3 billion smelter complex in Iran.
Mumbai-based Larsen & Toubro set up a task force ahead of the expected lifting of sanctions to scout for opportunities. The group will visit Iran and report back, Chief Financial Officer R. Shankar Raman told Reuters.
He said there were still geopolitical risks to getting involved in Iran. “It’s not going to be an easy decision.”
