Following the July announcement by chairman of India’s state-owned Kudremukh Iron Ore Company, Malay Chatterjee, that the company plans to sell as much as two million tons of pellets to Iran, head of Iran’s Steel Producers Association, Bahram Sobhani, has now confirmed that talks are ongoing with the Indian side over the $200-million annual deal.
The move is aimed at addressing a shortage of iron ore pellets by Iranian steel producers, Foolad News reported.
Sobhani, who is also the managing director of Mobarakeh Steel Company–Iran’s largest steel producer–said the current supply of iron ore pellets in the country is not commensurate with the upstream iron ore production as well as the downstream steel production.
He predicted that the shortage of iron ore pellets will persist until the first half of the next Iranian year (starting March 20, 2016), noting that a number of iron pellet production units are expected to become operational by the end of the current year.
“Therefore, at least until next year, we are left with no options but to supply the required iron ore pellets in cooperation with other countries,” he said.
Sobhani went on to explain that the country has two options in purchasing iron ore pellets from India: “We could either purchase pellets produced by KIOCL using iron ore from Brazil or alternately, export domestically produced iron ore to India to be processed at KIOCL’s facilities and then reexported to Iran.”
He noted that the latter option would be economically more viable since the other option entails KIOCL pricing the pellets based on its purchasing prices from Brazil, which would be more costly for Iran.
Most of Iran’s iron ore is low grade and needs to be converted to pellets to be used to make steel. The country is targeting annual steel output of 55 million tons by 2025, up from about 16 million presently.
Available data show that Iran produced 21 million tons of iron pellets last year while demand reached 28 to 29 million tons.
