Economy, Business And Markets

Mergers Could Help Save Small Mining Firms

Mergers Could Help Save Small Mining FirmsMergers Could Help Save Small Mining Firms

The cost of producing every metric ton of iron ore in Iran is between 15 and 20 dollars while the figure in Australia is around $7, said the chairman of the Iron Ore Producers and Exporters of Iran (IROPEX).

Production costs for mineral products need to decrease if the mining sector wants to improve its global position, Fooladnews cited Mehrdad Akbarian as saying during a presser.

As a way to reduce the costs in the mining sector, Akbarian urged the smaller companies active in exploration, extraction and processing to merge because major mining firms are able to produce minerals at lower prices.

“The government is expected to protect the holding companies and the amalgamation of smaller firms so that a dramatic transformation is achieved”, the IROPEX chairman noted.

According to Akbarian, the global developments in the iron ore sector are gradually wiping out smaller firms.

The administration, through the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), is concentrating its efforts to increase crude steel output to 55 million tons within the next decade from the current 16.5 million tons.

Building the so-called “seven provincial steel plants” is among IMIDRO’s top programs, which is expected to increase the national annual production capacity by some 8 million tons. After funding obstacles are removed through negotiations with the Chinese financiers, many such steel mills will start production of sponge iron (technically known as direct-reduced iron or DRI) as the input to make steel.

The expansion of steel plants is pursued by the government while there are multiple factors which threaten the steel sector. In a recent move to address the steelmakers’ concerns, the administration imposed protective import tariffs on a number of steel products. Based on the decision, as of the beginning of the new Iranian calendar year (March 21), import tariffs of 10%, 15%, and 20% will be imposed on steel ingot, steel slabs, and steel sections respectively.

Domestic steel producers welcomed the decision, as they have been urging the administration to do so for months.

But apart from the global decline in iron ore prices, the real challenge under the current circumstances is the unprecedented downturn in the construction sector which has considerably reduced demand for steel products.