India has allowed the Kudremukh Iron Ore Company (KIOCL) to source iron ore from Iran to manufacture iron ore pellets under rupee trade mechanism and export it back to Iran to be used in Iranian steel plants, ISNA reported.
The decision was made amid a global slump in iron ore prices, which has effectively rendered KIOCL’s 7-million-ton pellet plant idle. Since 2006, the KIOCL, which is a public sector undertaking (PSU), has been buying iron ore from Indian suppliers following the closure of its iron ore mines over environmental concerns.
“KIOCL has been looking for a market in Iran over the past one year. We would like to take advantage of the rupee trade mechanism and the demand for 10-15 million tons of pellets from steel plants in Iran,” said Chairman and Managing Director of KIOCL Malay Chatterjee.
The move will also help the Iranian steel sector overcome the shortages of iron ore pellet, as the officials in the ministry of industry, mine, and trade announced last year that the country was short of at least 6 million tons of iron ore pellets per year. Stressing the necessity of creating balance in steel production chain, the decision-makers believe there is surplus in some sub-sectors of steel industry while a few others suffer from lack of raw materials. In order to meet the National 2025 Vision Plan, the steel industry in Iran is expected to increase the annual crude steel production capacity to at least 55 million tons within the next decade.
Talks are ongoing between India and Iran on sourcing Iranian iron ore and exporting pellet. At a meeting held in New Delhi on May 22, the Indian commerce ministry said it had no objection against facilitating KIOCL for this arrangement and pledged the company all support for this initiative. The KIOCL has requested the Indian government to exempt the company from paying 5% in export duty on iron ore in this specific case.
Earlier, export of pellets to Iran was dealt with by Metals and Minerals Trading Corporation of India, which is India’s largest public sector trading body.
The new deal will also help Iran replace at least a small part of the massive revenue that has been lost due to western sanctions on its oil sales over the country’s nuclear energy program. Following steep global declines in iron ore prices, it is not economical for many iron ore producers to export their product when transportation costs are taken into account. Therefore, trading with India could be desirable for both sides, as Iran will be able to process the iron ore and change it to more valuable raw material, while India can pay off the Iranian assets through rupee.
