Iranian Aluminum Ingot Still Cheap in Turkish Market

Primary aluminum ingots originating from Iran are still on offer in the Turkish market below the prevailing market price.

Several sources told Metal Bulletin of the market situation on the sidelines of LME Week last week. They claimed throughout the year that primary ingots from Iran have been arriving on Turkish soil and sold at $40-50 below the prevailing market premium to fabricators and remelters.

Metal Bulletin last assessed the price of primary aluminum ingot in Turkey at $100-120 on a duty-unpaid free carrier agreement basis, as the Iranian material is being offered at a two-figure premium. Iranian ingot is widely available and at a premium of $70-75 per ton, one source said.

Economic and political instability that rocked Turkey over the last year has made cheaper metal more attractive.

Cheap credit poured into Turkey from major economies and developing markets, helping to propel GDP growth to 12%. However, its economic model, built largely on domestic demand and the construction sector, began to falter when the US Federal Reserve announced the end of its third quantitative easing program.

Anticipating a stronger dollar, investors have pulled money out of emerging economies. Turkey’s GDP growth slowed to below 3% last year from 9% in 2010 and 2011, while inflation of around 8% is far above the government’s 5% target.

The lira has trended throughout the year; it hit another record low against the dollar on November 8 following Donald Trump’s victory in the US presidential election and was recently at 3.2124.

The Iranian material is being sold effectively at scrap premiums, one source said, particularly to remelters who are using them to make finished products that are sold into the domestic market.

Several billet producers are picking up these ingots to boost the margin on their value-added output.

Given the volume of Iranian material arriving into Turkey, it is only a matter of time before Iran-origin goods, particularly those from remelters, arrive on EU soil, one source said.

In fact, it may already be arriving in billet form or as primary metal, the source added.

Still, estimates differ on how much metal is reaching Turkey. While one said it could be as much as 5,000 tons per month, others believe it is far below that level.

Iran is seeking to lift its aluminum smelting capacity to 1.5 million tons per year by 2025 from 470,000 at present. A shortage of bauxite and power is keeping output below 350,000 tons per year for now.

The Iranian government earmarked $15 billion for the mining sector to bolster copper, steel and aluminum output in its sixth economic development plan, which runs from 2016 to 2021.

Iran has around 11 million tons of zinc reserves, accounting for around 4% of the world’s total deposits and similar levels of lead, according to the Iranian Mines and Mining Industries Development and Renovation Organization.

But Iranian lead production of 40,276 tons in 2013 was around 0.7% of global output. Zinc and copper of around 130,000 and 188,574 tons, respectively, were just 1% of global production.

The country also produced just less than 300,000 tons of aluminum and 1,656 kg of gold in that year.