Economy, Business And Markets

Coal Producers Close to Insolvency

Coal Producers Close to InsolvencyCoal Producers Close to Insolvency

Head of the coal committee in the Iran Mine House (IMH), Mohammad Mojtahedzadeh has warned about the difficulties faced by owners of coal mines, noting that coal imports will need to increase in the coming years if prudent measures are not adopted by authorities, Eghtesadnews reported.

“The ministry of industry, mine and trade has not yet made a decision on the buying price of coal from mines. If the administration fails to arrive at a final decision on coal pricing within the next few months, more private coal mines could go bankrupt,” said the official.

The industry ministry could not come to a conclusion about coal prices during the last Iranian year (ended March 20). After an initial proposal to increase coal prices for the private companies’ consumption by 23%, the ministry finally approved a 15% price hike. But the increase in coal prices was rejected by Esfahan Steel Company, Mojtahedzadeh added.

“It was decided coal prices would be finalized in consultation with Esfahan Steel Company (ESC), formerly run by the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO). But as the company announced its privatization last year, its consent is no more required for price-setting,” said the IMH official.

Noting that the country needs four to five million tons of coal concentrate this year, Mojtahedzadeh said the current production rate is not satisfactory, warning that the sector could face shortages if the problems are not resolved.

Referring to the recent increase in labor costs, which constitute up to 60% of total production cost, he said private coal companies are increasingly losing their profitability margin, which could in turn lead to more mines shutting down and further loss of jobs.

The ESC, as the main domestic coal buyer, paid its debt to the coal mining companies for purchases in the last Iranian year in the form of steel products which have not yet been sold due to stagnation in the steel market. ESC officials say the company is unable to afford higher coal prices as it would increase the final cost of steel products which would inversely affect the company’s competitiveness.