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Iron ore was Iran’s third nonfuel mineral export during the first four months of the current fiscal year.
Iron ore was Iran’s third nonfuel mineral export during the first four months of the current fiscal year.

Private Iron Ore Miners Face Crisis

IROPEX blames weak domestic demand and the untimely removal of iron ore export tax exemptions as the main causes of the crisis
Iranian steel mills produced over 16 million tons of steel during the previous Iranian year that ended in March and consumed 32 million tons of iron ore in the process. This is while miners produced close to 40 million tons of ore last year

Private Iron Ore Miners Face Crisis

Iran’s iron ore sector has hit a rough patch as 90 iron ore mines out of a total of 190 have shut down in recent months, according to Ghadir Giafeh, the head of board of directors at Iron Ore Producers & Exporters Association of Iran, otherwise known as IROPEX. He added that nearly all of the closed mines belong to the private sector.
The miners’ plight has also been showing in the government books. According to the Ministry of Industries, Mining and Trade, Iranian mines have only paid about $14.8 million in mining royalty to the government during the first quarter of the current Iranian year (March 20-June 21). The figure was $26 million for last year’s corresponding period.
IROPEX blames weak domestic demand and the untimely removal of iron ore export tax exemptions as the main causes of the crisis.

  Diminishing Domestic Demand
According to IROPEX secretary Alireza Siasirad, a sizable amount of iron ore produced in excess of demand has currently saturated the domestic market and there is simply not enough steelmaking capacity.
Iranian steel mills produced over 16 million tons of steel during the previous fiscal year that ended in March, and consumed 32 million tons of iron ore in the process. This is while miners produced close to 40 million tons of ore last year.
Domestic steelmaking capacity has in fact been on the rise for the past few years and is expected to dry up Iran’s iron ore reserves in the long run. Iran’s goal is to become the world’s 6th largest steel producer as per the 20-Year National Vision Plan (2005-25), which stipulates production of 55 million tons of crude steel per year by the deadline.
This requires Iran to boost its production capacity of iron ore concentrate to 53.5 million tons from the current 44 million tons; sponge iron to 58 million tons from 26 million tons; and pellets to 88 million tons from 28 million tons.
Iranian steel mills have so far realized close to half of the crude steel production capacity target, according to Iranian Mines and Mining Industries Development and Renovation Organization. As such, steelmaking capacity currently stands at about 25 million tons per year, 17 million tons of which is being utilized.
However, the main issue is that the plan is not proceeding quickly and consistently. The industries ministry’s excessive issuance of construction permits for granulated iron ore and iron ore concentrate plants has resulted in a saturated market but pellets are on the short end. Meanwhile, the construction of several pellet plants in the Sangan region of Khorassan Razavi Province is meant to partly alleviate the problem.
Furthermore, faced with a volatile commodity prices in global markets every day, miners cannot afford to prevent losses until the domestic demand is somehow stimulated. Here, the logical solution, considering the unbalanced iron ore capacity making, is to embark on exports of the industrial materials.

  Untimely Removal of Export Incentives
Based on a recent directive announced during the last session of the Iran Economic Council, granulated iron ore will be removed from the list of Iran’s tax-free non-oil exports. The directive comes into effect in late September.
The decision is premature and will extend the current recession in the market by causing more producers to go out of business, says the IROPEX chief. This is while global iron ore prices have improved during the past few months after a year of sticky lows in 2015.
Iron ore ended 2015 at its lowest in years as it dropped to about $30 per ton in December. The steelmaking material took on a positive trend in early 2016 and over signs of China’s cutbacks in its steelmaking capacity, spiked to a high of $70.46 per ton in April. The commodity’s gains lost steam in early May and have been recovering ever since. According to Metal Bulletin, 62% Fe iron ore CFR China stood at $60.95 per ton on Monday, up 0.96% from last week.
The best way forward in the current situation, according to the head of the Mining and Mineral Industries Commission of Iran Chamber of Commerce, Industries, Mining, Trade and Agriculture, Bahram Shakouri, is to offer iron ore at Iran Mercantile Exchange. Shakouri believes that doing so can help correct the unbalanced prices in the domestic market while assisting the sector with exports.
Iron ore was Iran’s third nonfuel mineral export during the first four months of the current Iranian year (March 20-July 20) as more than 5.7 million tons worth $227.2 million were sold abroad, up 69% in volume and 86% in value compared to last year’s corresponding period.
In 2015, Iran exported 14.8 million tons of iron ore, down 35% compared to 21.8 million tons in 2014. The country was the world’s 11th leading exporter of the steelmaking material.
Most of Iran’s iron ore exports were to China. In 2015, exports to China fell  by 40% from 2014 to 13.2 million tons owing primarily to prevailing low global iron ore prices.

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