Economy, Business And Markets

Controversy Surrounds Plan to End Raw Mineral Exports

Controversy Surrounds Plan to End Raw Mineral Exports  Controversy Surrounds Plan to End Raw Mineral Exports

The ministry of industry, mine, and trade is aiming to terminate the sales and export of raw minerals within the next two years. This is while many of the processing facilities in the mining sector have not yet come into operation and there is dissension among the mining sector players over the definition of “raw minerals”, Eghtesadnews reported.  

While lawmakers in the parliament stress that exporting iron ore is considered as selling raw minerals – thereby hurting the economy, mining companies argue that each stage of utilization of minerals creates a certain level of value added.

“There is an incorrect perception about the definition of raw minerals. In the long chain of processing iron ore to steel ingot, even if the chain is not complete, there could be a certain degree of value added created by the producers or the processing companies”, said deputy chairman of Iran Mine House, Mohammad-Reza Bahraman, as saying.

Mining experts argue that what the lawmakers call “raw mineral” is in fact mineral with little value added and cannot be categorized as absolutely unprocessed.

 Mining Firms in Danger

The move to confront what is deemed as selling minerals in the raw form can create major problems for the mining firms, especially as the global iron ore prices have declined substantially.

Last year, most of the small and medium sized iron ore mines in the northern half of the country were forced to close down.

There is also the issue of mine royalty; that is percentage claimed by the government from mining firms, currently standing at 25%, which is making it uneconomical for miners to export iron ore. Under these circumstances, the only way for the mining companies to survive is to provide them with a domestic market.

The national 2025 Vision Plan requires the steel sector to produce at least 55 million metric tons of crude steel within the next decade and numerous processing facilities are being constructed to balance the chain. Last year, the industry minister warned about the serious annual shortage of at least 8 million tons of iron ore pellets. Now, decision-makers are willing to help the country become self-sufficient in raw materials for steel production. One of the measures the current administration has taken in a bid to achieve this goal is the implementation of vast exploration operations aimed at discovering new iron ore reserves.

However, mining sector activists are not so sure the government will be able to put an end to the sales and export of raw minerals – however it is defined – arguing that the mining and steel sectors have not yet developed necessary infrastructures.

 Populist Rhetoric

Any major decision by the industry ministry should be taken based on the realities on the ground, says secretary of the Iranian association of producers and exporters of minerals, Kamran Vakil, adding that “making such a big promise is a populist, which will not yield positive results in the manufacturing sector.” He added that the mining sector has a bitter experience with such rhetorical approach during eight years of former president Mahmoud Ahmadinejad’s term in office.

“Terminating the sales of raw minerals cannot happen within a two-year period considering the critical conditions in the mining sector,” Vakil stressed.

He predicted that it would take at least a decade for the mining firms to acquire technical know-how before they are able to create value added for mining products. “The infrastructure will be gradually provided through investments”.

Head of the Iranian Mining Engineering Organization, Hormoz Nasernia, told Eghtesadnews that no prohibition should be imposed on the export of raw minerals. “The administration better let the mineral producers free to either sell their products domestically or export them”, he added. The official also noted that many other mineral products, apart from iron ore, are exported in unprocessed form without thoroughly going through the value chain. “Officials should not focus on iron ore. Cement is also exported as raw mineral otherwise it should be exported as concrete blocks.” he argued.