Economy, Business And Markets

Gov’t Eliminates Iron Ore Export Tariff

Gov’t Eliminates Iron Ore Export TariffGov’t Eliminates Iron Ore Export Tariff

The government in September eliminated tariffs on raw iron ore in blocks or slabs, ore concentrate, and iron ore pellets, reported SENA.

Trade Promotion Organization (TPO) said the elimination came last month based on a proposal put forward by the ministry of industry, mine, and trade.

The decision eliminated the tariffs set by the previous government in November 2010 aimed at discouraging the mining industry from selling raw iron.   A previous law imposed tariffs as high as 70% on raw iron ore in blocks or slabs, 50% on ore concentrate, and 35% on iron ore pellets.

President Rouhani’s administration made the recent decision based on the country’s 138th Constitutional Article. The Article specifies that in addition to the council of ministers or a single minister being authorized to frame procedures for the implementation of laws, the council of ministers has the right to lay down rules, regulations, and procedures for performing its administrative duties.

The current administration, interestingly, continued such policy to gradually increase the tariffs on iron ore. In January this year, deputy minister for industry, mine, and trade, Ja’far Sarqini, announced his ministry’s plans to annually increase the tariffs on iron ore by five to ten percents until 2017.

Regarding the current situation of the country’s steel industry, the decision to eliminate the tariffs on iron ore could conflict with the previous government’s intention to minimize sales of the raw iron. In the meantime, the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) has apparently focused on other alternatives to end the export of raw iron ore. The IMIDRO head, Mehdi Karbasian, said on Thursday that within the next two years, the steel sector would gradually witness a decrease in the volume of iron ore export.

Karbasian said the new projects to produce ore concentrate, iron ore pellets, direct-reduced iron (DRI) known as sponge iron, and ultimately steel would minimize the export of raw iron ore.

“In less than a year, some 4 million tons would be added to the country’s iron concentrate production capacity. Such increase would require at least 5 million tons of iron ore every year”, said Karbasian.

The decision to eliminate the tariffs on exported iron ore, when taken into consideration together with the government’s plans to inaugurate several manufacturing units in steel sector, could convince the analysts that the current government is trying to ‘temporarily’ facilitate the export of iron ore.

Such facilitation, in the next two or three years, would bring revenue for the country which has been under severe sanctions during the past few years. A part of the revenue could even be allocated to support the new plans in steel sector’s upstream and downstream industries in a way that all the iron ore extracted in mines is consumed by downstream steel industries.

The government is determined to implement such projects in order to move closer towards the country’s 2025 Vision Plan. According to the strategic plan, the country, which is the world’s 15th largest steel manufacturer, should annually produce up to 55 million tons of steel by 2025.

Despite the statistics announced by the ministry and IMIDRO, which state that Iran produces 20 million tons of steel per annum, experts say the actual annual production is somewhere between 15 and 18 million tons.