Economy, Business And Markets

Non-Ferrous Metal Sector Poised for Growth

Non-Ferrous Metal Sector Poised for Growth Non-Ferrous Metal Sector Poised for Growth

The easing of international commercial sanctions against Iran is likely to boost both the country’s exports of non-ferrous metals and ores, as well as foreign investment in the sector.

The Iranian Mines and Mining Industries Development and Renovation Organization announced on March 14 that it had signed a memorandum of understanding with China’s Sinosteel Corporation to establish an alumina production plant and aluminum factory in Iran, along with an associated power plant supplying on-site electricity, Metal Bulletin reported.

According to IMIDRO, the alumina and aluminum plants would be established by a joint venture under an engineering-procurement-construction-financing contract with an initial annual production capacity of 1.6 million and 350,000 tons respectively.

On February 23, German copper manufacturer MKM Mansfelder Kupfer und Messing GmbH signed a memorandum of understanding with the National Iranian Copper Industries Company, involving an investment of $1.14 billion in Iranian mineral projects, including copper ore production.

Under the deal, MKM would help Iran develop downstream industries to obtain copper from copper cathodes. And the German company has offered to purchase 70,000 tons of copper cathodes from NICICO annually.

IMIDRO has long been trying to boost mineral production capacity in Iran, estimating that the country’s new mineral projects proposed in the country’s Fifth Five-Year Development Plan (ending March 2016) should have cost more than $28 billion in investment.

  Funding Problems

But according to US Geological Survey analysis released in June 2014, despite some foreign investment in Iran’s mineral sector (including non-ferrous metals) in the past few years, the availability of international funding for mineral-related projects by government-controlled and private companies has been hampered, partly because of western economic sanctions, now being eased.

That said, sanctions have not been the only problem: “High inflation and the relative lack of investment in the petroleum sector” are among them, the USGS report said.

In 2012, the production of aluminum in Iran was estimated at 230,000 tons (plus 820,000 tons of bauxite), according to the USGS. Chromite production [mines output, concentrate] was estimated at 400,000 tons.

Copper is another key non-ferrous metal in Iran, with smelter output—blister or anode—at around 270,000 tons in 2012, while refined output (cathode) was estimated at 225,000 tons for 2012. The gross weight of copper ore mine output was estimated at 38 million tons in the same year. Iran made 80,000 tons of zinc in 2012 and 210,000 tons of zinc concentrate.

The production of gold in 2012 yielded 2,500 kg, said the report. This is while the gross weight of lead mine concentrate output was 80,000 tons; manganese concentrate output was 200,000 tons and molybdenum concentrate, 7,000 tons.

  Exports Persist, Albeit Unevenly

Despite the economic sanctions imposed on Iran as a result of the nuclear standoff, it has managed to export non-ferrous metals, although trade levels have been uneven.

Take copper. In 2010, Iran exported $180.7 million worth of unwrought refined copper and copper alloys to the EU, and in 2012, it exported $58.3 million worth. In 2013, it exported $3.5 million worth of copper scrap to the EU, according to international trade data.

In 2014, the EU imported $7.8 million worth of unwrought aluminum from Iran and $2.1 million worth in 2012.

There have also been some significant exports to neighbor Turkey. For instance, in 2014, Iran exported $165.3 million worth of unwrought refined copper and copper alloys to Turkish buyers; $88.3 million in 2013; and $160 million in 2012. And in 2014, Turkey imported $107.3 million worth of unwrought aluminum from Iran, and $66.7 million worth in 2013.

Looking ahead, stressed Hani Karami, the managing director of private Iranian mining company Sakht Kooshan Zaman, Iran is set to prosper from exports and the domestic supply of a wide range of non-ferrous metals, including aluminum, copper, lead, nickel, tin, titanium and zinc, and alloys such as brass.

Precious metals such as gold and silver, and rare metals such as cobalt, mercury, tungsten, beryllium, bismuth, cerium, cadmium, niobium, gallium, lithium, selenium, vanadium and zirconium, could all play a critical role in the economy of the Islamic Republic, as it develops.

Mohsen Bazarnoei, deputy chief of economic and financial affairs of the National Iranian Copper Industries Company, explained: “Our priority is to cover the needs of the domestic market.

The official added that while production volume in 2016 is forecast to be around 193,000 tons, the company will export its surplus to international markets.

Bazarnoei told Metal Bulletin that the company’s current prospects are far better than in 2015, saying international exports could be valuable. Noting current sales agreements, he said NICICO will sell a total of 100,000 tons of copper cathodes that are going to be delivered.

According to Bazarnoei, NICICO will continue to expand production and is targeting 400,000 tons of annual copper production by 2018.

“NICICO will leap forward and grow by setting stable business relations in its target markets such as China, India, the EU and [Persian] Gulf nations,” he said.

  Growing Interest Despite Obstacles

Sakht Kooshan Zaman mainly works on copper, manganese, gold, lead and zinc in about 40 mining sites across Iran.

Karami said that although his company is already selling products, such as manganese and copper, mostly in the domestic markets, it is negotiating with international investors to establish new processing plants.

He cited France-based industrial engineering company Fives Group’s agreement with IMIDRO as an example of growing interest among international business groups in investing into the Iranian non-ferrous metal industry.

“We need fundraising to develop our exploration and processing plants,” said Karami, adding that once all of the sanctions are lifted, the climate will be convenient for rationalizing joint partnership agreements with foreign investors.

On the sanctions, Karami said those on banking and shipping services were “the most important obstacles for the mining sector in Iran”. Their removal and an end to other sanctions will create “many opportunities” for the Iranian mining and non-ferrous metals industry.

Arash Shojaei, the founder and CEO of Iranian consultancy firm Ray Vista, said metal companies were searching for new markets, particularly in Europe and East Asia, adding that “there is also a significant tendency, particularly from European companies, to invest in Iran”.

Shojaei, however, added that Iran needed to improve power supply reliability, noting that it would be needed to fulfill an Iranian government plan to increase aluminum production capacity to 1.5 million tons per year by 2025 by developing two smelter projects with 350,000 tons per year nominal capacity in the south and southwest of Iran.

Lead and zinc also have potential in Iran. Eslami Qane’, the managing director and board member of another Iranian mining firm, Bama Company, said it has the capacity to produce 6,500 tons of lead concentrate and 25,000 tons of zinc concentrate annually.

According to Qane’, all the company’s lead and 60% of its zinc ingots are exported, the rest sold domestically. He said the company is exploring expansion of its capacity over the next five years.

Considering Iran’s non-ferrous industry as a new player in the global market, Qane’ said Iranian producers should look for trading with all countries, including emerging markets, rather than limiting themselves to developed and neighboring countries with which Iran has traditional trading links.