The global iron ore crisis and the increased mining royalties in Iran have put small and medium iron ore mines, especially those in the northern half of the country, under great pressure, making them consider exporting the mineral to the northwestern neighbor Turkey, Fooladnews reported.
Since iron ore prices fell below $50 per ton last year, it is not economical anymore for the iron ore mines to incur high transportation costs and send the product to the southern port of Bandar Abbas for export. Moreover, the government’s decision to significantly increase the mining royalty and mining usufruct fees to up to 25% was a blow to iron ore producers, although they will be allowed to pay less royalty if the iron ore is processed into iron ore concentrate, iron ore pellet, or sponge iron (technically known as direct-reduced iron or DRI).
The abovementioned strains plus Turkey’s annual demand for 25 million tons of briquettes have encouraged the iron ore producers to seek ways to form consortia to export hot-briquetted iron (HBI) – a compacted form of DRI designed for ease of shipping, handling, and storage – to the neighboring country. The move, of course, needs good transportation infrastructure and a strong consortium which can help maximize profits.
The parliament’s royalty rebate program allows the iron ore producers to pay only 15% in mining usufruct fee if they continue the processing and produce sponge iron (the input for steel plants). However, considering the huge transportation costs, such rebate is seemingly not a strong motivation to establish new processing facilities which require huge investments. That is why exporting briquette to Turkey is convincing enough to invest in processing facilities and produce DRI or HBI.
Key players in the mineral and steel sectors have already presented the minister of industry, mine, and trade with the proposal to supply Turkey with HBI, waiting for the ministry’s response. Meanwhile, it should be taken into account that importing iron ore pellet, which is not adequately produced in the country, and transporting it to reduction facilities to make DRI or HBI are not economical. Therefore, iron ore pellet should be produced domestically and then turned into DRI or HBI.
HBI Viable Alternative to Scrap Iron
Contrary to Iran’s steel sector, Turkey’s steel industry is heavily dependent upon scrap iron. Relying on scrap iron, Turkey graduated to the eighth global producer of steel in 2013 and the third European steelmaker after Russia and Germany by producing 36 million tons of crude steel per annum. Turkey’s Prime Ministry Investment Support and Promotion Agency has announced that feasibility studies will be conducted regarding alternatives to scrap metal like DRI or HBI, adding that depending on the results of the feasibility reports, possible investments will be supported in this sector according to their international viability.
Although exporting HBI to Turkey seems to be a good option, officials and private sector iron ore companies should soon start negotiations with their Turkish counterparts and assure them of Iran’s capability to regularly supply the raw material.
“Entering Turkey’s steel market requires expansion of iron ore pellet capacity in our country. As long as the domestic capacity to produce iron ore pellet is not developed, exporting sponge iron will not be economical”, the managing director of Mobarakeh Steel Company, Bahram Sobhani, told SMT news.
Sobhani added that the investment to increase iron ore pellet production should be made in mines. By doing so, it would be possible to establish processing facilities near the border with Turkey and also to set up joint facilities with the Turks.
