Feasibility Study of Production of Steel (Billet) and Sponge Iron in Iran

ABSTRACT: Nowadays, regarding the economic growth of developing countries the need for steel production has increased considerably. Iran as one of the big consumers of steel can be a good place for undertaking projects for Steel and Sponge Iron factories. As Iran has God-given relative advantage in this product, this research’s aim is do a feasibility study on building a steel and sponge iron factories (raw material for steel). The research looks into to examining whether the financial viability of such investment would be profitable or not. The study tests the impact of establishing steel factories from investor’s point of view. The thesis undertakes a financial analysis when NPV and IRR are conducted. In addition, the thesis measures the riskiness of the project through sensitivity analysis and risk analysis. The software which the paper employed in testing process is Excel and Crystal Ball which are common tools in feasibility study of projects. The paper tested investment criteria for one middle scale factory in order to give a better idea to different users of the result of the study. Bankers and owner perspectives being profitable project, means that project attracts investor to invest in this field of industry. Based on results, NPV and IRR were obtained 10,431,069 million Rial and 42.4%, respectively. The results of the analysis indicate that the investment can be a profitable project for both domestic as well as foreign investors. However, the research found that fluctuations in the prices of metal make this project to be a relatively high risky project. Keywords: Billet, Sponge iron, Investment appraisal, Sensitivity analysis, Risk analysis. ……………………………………………………………………………………………………………………………………………………………………………………………………………………