Energy shortages have forced the shutdown of kilns at 22 cement factories across Iran, disrupting production and threatening supply to the construction industry, one of the country's few industries to have witnessed growth in 2024.
Cement production requires continuous operation of kilns, 24 hours a day. Even short power or gas outages can halt the process, especially the production of clinker, a vital component of cement.
The secretary of the Cement Industry Employers Association, Ali Akbar Alvandian, told ILNA news agency on Thursday that gas supplies to cement factories have been increasingly restricted since October, when the rolling blackouts started.
Many factories now have no gas supply at all, and some, like Tehran Cement, are barred from using mazut (a pollutant-heavy high-sulfur fuel oil) as an alternative due to their proximity to urban areas and associated pollution concerns. This has led to complete shutdowns at these facilities.
The shutdowns are impacting major cement producers across the country, including Shomal (North) Cement, Firuzkuh Cement, and Abik Cement, the latter of which has both of its kilns out of operation.
The widespread nature of these closures raises concerns about potential shortages and price increases in the construction sector and other industries that rely on cement, an industry which the International Cement Review this year said had seen a year on year growth of 24 percent in spite of the country's economic collapse.
Iran’s energy infrastructure is grappling with one of its most challenging winters. Facing a critical natural gas, President Masoud Pezeshkian’s administration has prioritized avoiding the widespread burning of mazut, as a substitute at major power plants in several cities such as Arak, Isfahan, and Karaj.
To mitigate mazut emissions, the government ordered planned blackouts, with power cuts announced across several provinces. This measure has been presented as an environmental alternative to mazut, with officials citing health concerns associated with the fuel’s toxic emissions.
New data from the Central Bank of Iran (CBI) reveals that the country's GDP growth has slowed since the beginning of 2024. During the summer, GDP growth stood at 2.7%, which is half of the 2023 growth rate.
The GDP growth rate has fallen across all sectors except agriculture. However, calculations by Iran International indicate that the Central Bank's figures are overly optimistic and, in some cases, manipulated.
For instance, while Iran's Statistical Center and the Research Center of the Parliament reported a 1% decline in the industrial and mining sector's share of the GDP during the summer due to repeated power outages, the Central Bank claims a 1.7% economic growth in this sector during the same period.
The industrial sector is important for Iran’s economy, as part of it is based on or related to oil-related sectors and accounts for around 15% of Iran's GDP and employs around a third of the country's 25 million workers.
Another example is the agriculture sector. According to the Statistical Center of Iran, this sector's output has been in decline since 2021 and the share of employment in the sector declined by 1% this summer, reaching 14.5%.
Yet, despite worsening droughts and widespread power outages, the Central Bank claims a 2.8% growth in agriculture during the summer.
The International Monetary Fund (IMF) previously predicted that Iran's economic growth would decline from this year until 2028, eventually reaching 2%.
Oil: The driving force of economic growth
In the last two years of Donald Trump's presidency (2018-2020), Iran faced negative economic growth due to US sanctions. However, with the Biden administration's policy of appeasement toward the Iranian government, Iran's economic growth turned positive again.
Details from the Central Bank's statistics show that the driving force behind Iran's economic growth over the past 3-4 years has been the oil sector. During this period, Iran's oil exports quintupled, reaching 1.6 million barrels per day in 2024 in average.
Iran exports 40% of its oil and gas condensate output, and the growth in this sector has had a significant impact on boosting the country’s economic growth.
It remains unclear how Iran’s economic growth will fare considering a sharp drop in oil exports this fall and the anticipated start of Donald Trump’s administration, which has promised to revive the "maximum pressure" campaign against Iran. Data from oil tracking companies such as Kpler and Vortexa indicate a 500,000-barrel-per-day decline in Iran's oil exports since October.
At the same time, the head of Iran's Agricultural Guilds Chamber recently reported a 30% reduction in autumn crop planting, and an official mentioned a 20% damage to poultry farms due to power outages in autumn.
This fall, in addition to power cuts, Iran has drastically reduced gas supplies to industries, exacerbating the recession in these sectors.
A Look at key economic indicators for Iran in 2024
The year 2024 has brought significant challenges for Iran, including severe electricity and gas shortages, a sharp depreciation of the rial, two direct confrontations with Israel, weakening of its regional proxy groups and the fall of Bashar al-Assad's regime in Syria as well as the end of Joe Biden's presidency.
This summer, Iran faced a 25% electricity deficit, which has been continuing in autumn due to gas shortage. In fall, the daily gas shortage peaked at 30% of the country's gas demand.This seriously impacts industries, particularly the steel sector, which has witnessed a 46% decline this year.
Since the beginning of 2024, the US dollar's value in Iran has surged by 60%, and inflation, even according to official estimates, has exceeded 32%. Over the past six years, Iran has consistently ranked among the ten countries with the highest inflation rates.
Official statistics show that despite the addition of 5 million people to Iran’s population since 2018, when US sanctions were reintroduced, the number of employed individuals has only increased by 300,000 to 25.1 million.
Poverty rates in Iran have also risen during this period. Even according to the Islamic Republic's official statistics, about 28% of Iran’s population was below the poverty line in 2018. Now, this figure has climbed to 33%, with some parliamentarians, experts, and domestic media outlets claiming the real number exceeds 50%.
One of the few positive aspects of Iran's economy is the increase in oil exports to China. Data from Kpler and Vortexa shows that Iran's average daily oil exports in 2024 stood at approximately 1.6 million barrels in average, 34% higher than in 2023 and almost double the 2022 levels, but the figure plunged to 1.3 mb/d in November.
Iran’s economic vows will worsen if Donald Trump acts upon his threats to reduce Tehran’s oil exports to China, which provided close to $40 billion in revenues until this fall.
