I ron ore has been among the hardest hit industrial commodities, with global prices falling more than a quarter this year and Iran’s export of the raw material in 2014 reaching its lowest in nearly two years.
The global iron ore prices have significantly dropped from $136 per ton at the beginning of 2014 to nearly $75 per ton causing serious concerns for the producers and exporters of the material, especially the owners of small private iron ore mines.
Analysts have predicted that Iron ore prices will probably extend declines in 2015 and 2016 as global supply exceeds demand and the world’s largest producers plan to add production, Eghtesadnews reported.
This is while Iran is determined to increase its steel production to more than 50 million metric tons in the next ten years, from the current rate of less than 18 million metric tons, as per the objectives outlined in the 20-year National Vision for year 2025.
In line with this objective, the minister of Industries and Mines, Mohammad Reza Nematzadeh recently called for merging the small and large steel manufacturers to help minimize the losses borne by the smaller steel companies as well as boost the level of steel production.
According to Nematzadeh, “the total global steel production is expected to exceed 2 billion metric tons by 2020 and Iran is planning to account for 2.5 percent of this volume.”
Since Iron ore is a key material for steel production, with two metric tons of 50% grade iron ore required for producing one metric ton of steel, it is easily conceivable that the global iron ore crisis is going to affect the steel industries in Iran.
This is while, Iran’s iron ore exports have dropped by almost 40 percent in the current Iranian calendar year (ending March 20, 2015) compared with the previous year, according to statistics provided by Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO).
Iran was the fourth-largest supplier of iron ore to China last year. But, the international supply glut, combined with lower Chinese demands made it increasingly difficult for Iranian iron ore to compete with higher quality cargoes from Australia and Brazil.
Market watchers are worried that not only is Iran losing its competitive edge in the global iron ore market, but that in lack of prudent government measures to regulate the iron ore exploration and extraction, the country will soon have no option but to resort to importing iron ore to meet its ambitious steel production target.
The iron ore manufacturers have called on the government to take notice of their plights and divert more attentions to expanding iron ore extraction and exports before focusing so much on steel production.
Failing to boost iron ore production would translate into increased competition among steel companies for access to the raw material and pushing the country to increase its iron ore imports, thus making the steel industry more dependent on the international market.
The steel industry in Iran is currently faced with shortage of iron ore pellet, a key raw material for producing steel. Reports by Fooladnews indicate that Iran imported 1.3 million metric tons of iron ore pellets, worth $235.8 million in the first nine months of the current Iranian year (ending March 20, 2015).
Based on statistics, Iran produced 52 million metric tons of iron ore last year, 36 million metric tons of which came from 7 subsidiaries of state-owned IMIDRO holding company. Of this output, 26 million metric tons were consumed domestically and 10 million metric tons were exported. Iran’s production in the mines and mining industries is valued at nearly $30 billion, the majority of which comes from iron ore reserves and the value added from the downstream industries in the production chain.
Gov’t to Revise Import Duty
Pressure is on the Iranian steel industry is not limited to collapsing iron ore prices. Steel production has also suffered in particular because of enormous Chinese steel production and the tendency of this country to ‘dump’ the commodity at extremely low prices (even below production costs) in other countries.
Iran’s major steelmakers have for many months been complaining about what they call a “tsunami of cheap steel imports,” petitioning the government to impose anti-dumping measures on imports of finished steel products from China, Ukraine and Russia.
In a move to protect the domestic steel manufacturers, Nematzadeh, speaking on the sidelines of the 5th Iranian Steel Market Conference (ISMC 2015) on Tuesday said the government is planning to revise the tariffs on import of steel products, IRNA reported.
“If ratified by the cabinet, the revised tariffs will be implemented from the beginning of the next Iranian year, starting March 21, 2015,” Nematzadeh said without elaboration.
Imposing higher tariffs on steel imports, along with an earlier announcement by the deputy minister of industry, Mehdi Karbasian to permit import of steel products “only using market exchange rates,” could finally provide a relief for the domestic steelmakers. Until the 10th of January, Chinese steel was imported using the official dollar to rial exchange rate, which is much lower than the market rate and thus provided a virtual subsidy for importers.
Last month, Iranian Steel Producers Association (ISPA) reported that Iran’s steel imports were increased by 33 percent in the first half of the current Iranian year, compared to the similar period last year. This is while steel production grew by only 3 percent within the same period.
Iran’s crude steel production totaled 16.33 million metric tons in 2014, placing it as the world’s 14th biggest in the World Steel Association’s latest report.
