Abstract Iran has a great advantage in the development of the steel industry due to its access to mineral resources and energy, extensive consumer market, and low-cost labor. The Iranian steel industry is almost state-owned, has developed less regarding the global value chain, and is mostly based on direct reduction and electric arc furnace technology; therefore, the industry should be studied as a specific case given its unique characteristics. In this article, the Iranian steel value chain in 2014–2016 is studied using the value chain analysis and material flow analysis simultaneously for the first time. According to the research findings, weakness in the development of transportation infrastructure and poor geographical distribution of value chain units has led to the deviation of production from the nominal capacity (i.e., loss of 12, 30, and 240 million dollars in pellet production in 2014–2016, respectively). The value chain also demands frequent imports/exports due to the production gap (i.e., importing 1 million tons of pellets and exporting 13 million tons of iron ore and concentrate in 2015). On the other hand, the upstream industries have a permanent advantage that deeply roots in easy access to the minerals and lower costs in transportation and energy. Finally, the pricing of intermediate products based on the ratio of steel ingot prices is criticized, while wage conversion and commodity purification contracts are proposed as possible solutions for the reduction of overhead costs (i.e., can lead to 8 extra added value in sponge iron factories in 2016).Graphical abstract
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