The government intervention in the pricing of iron ore products and steel has no positive outcome and only leads to disillusionment among producers, says the deputy chairman of Iran Iron Ore Exporters and Producers Association.
“The sudden drop in global iron ore prices, the government’s recent directive to further reduce pellet and sponge iron prices by 3% and 6%, high export taxes on iron ore concentrate and pellets, and the ban on export of unprocessed iron ore have recently driven many mines out of business,” Donya-e-Eqtesad quoted Bahram Shakouri as saying.
The Ministry of Industries, Mining and Trade recently issued a directive to Gol Gohar Iron Ore Company and Chadormalu Mining and Industrial Company to reduce pellet prices by 3%, and sponge iron ore prices by 5% to revitalize the country’s steel industry, which is currently suffering from recession.
Furthermore, the price of Iranian iron ore of 60% purity, which was $50 on October 21 and $48 on October 28, dropped down to $44.3 on November 4, Metal Bulletin reported.
This is the lowest Iranian iron ore prices recorded since July 8.
According to Shakouri, in Iran’s unbalanced steel value chain, the government should not pit one private sector against another, especially since iron ore producers have always received the short end of the stick.
“They have the lowest share in steel prices compared to other steel producing countries such as India,” he said.
Shakouri believes that the main issue hindering the steel industry is production efficiency, which lowered iron ore prices, and this is where government intervention is unhelpful.
“Comparing the finished prices of Iran’s steel ingot with India’s, it would become evident that despite the cheap energy resources the government offers to the industries, Iran’s production costs are still way above those in India,” he said, adding that the government’s reluctance to fully privatize the steel industry is the main factor that has caused iron ore processing to become uneconomical.
“If we are to join the World Trade Organization anytime soon, we can no longer view government-enforced pricing as a means of solving the crises of iron ore, steel and auto manufacturing sectors,” the official concluded.
