Approaching Depletion of Iron Ore Reserves Giving Cause for Concern

Some of the country’s open iron ore reserves are already running out. 

The total proven reserves of iron ore in Iran are estimated to stand at 3.3 billion tons. However, 160 million tons of iron ore are needed to achieve the 20-Year Vision Plan’s (2005-25) target of 55 million tons of annual steel production, Jahan-e Sanat reported.

The Supreme Audit Court of Iran expressed concerns about the depletion of the country’s iron ore reserves in a report released in spring. Lack of new discoveries has led to a shortage of raw materials needed by steel mills. Therefore, expansion of explorations is a must.

Prior to the warning made by the court, the Iron Ore Association of Iran and other related groups had constantly stressed that the main part of the mining sector, i.e., the beginning of the production chain has been neglected due to the imbalance in the steel production chain. 

According to Saeed Asgharzadeh, secretary of the association, the country should achieve a big leap in exploration of iron ore. 

“Slow reforms and slight increases in budget cannot meet exploration needs. We should take note that the limited mineral resources can affect the economy, employment and give rise to other crises,” he said.

Need to Tap Deeper

Pointing to the need to tap into deeper reserves, Asgharzadeh said, “Experts believe that we must tap into underground reserves to resolve this problem. However, we do not have much experience in exploring deep reserves compared with other countries; it is necessary to seek such know-how from others.” 

Reza Jadidi, the director of the Planning, Information Technology and Budget Office of the Geological Survey and Mineral Exploration of Iran, says based on the number of discovery permits issued by the Ministry of Industries, Mining and Trade and the level of production and consumption of iron-based products by steel industries, the remaining reserves, without considering the parameters related to exploitation and processing efficiency, stand at 31 years.

“In view of the aforementioned parameters and the fact that the hematite ores are not used properly due to processing difficulties, the remaining iron ore reserves would last for only 14 years,” he said.

“These estimates of reserves have been obtained, on the basis of the current pace of exploration and identification of reserves. By not making any improvement in exploration, especially deep exploration, we will face crises in the supply of raw materials needed by mining industries, including those active in iron, lead, zinc, bauxite and gold mining.”

The official said the country’s industries need large-scale mining reserves and the small proven reserves do not meet the industries’ needs. 

Stressing that most of the identified iron reserves in the country are hematite ores, the official said, “These types of reserves are complex when it comes to processing.”

Referring to the shallow depth of mining in Iran and the advantages of deeper exploration, Jadidi said, “Given the origin of minerals and types of ores in the country and based on geological and exploratory evidence, we expect to discover deep and large reserves, but it is important to pay special attention to the production cycle of basic geological and exploratory information as well as the application of new methods of deep exploration, including aerial geophysics and spectral data collection. This requires a change in the structure of financing and budgets of the Geological Survey and Mineral Exploration of Iran.”

He suggested that the task could be completed in the form of joint projects to increase the efficiency of geological and exploration projects to produce basic information and reduce investment risk in the mining sector, which have not taken place so far. 

Cutoff Grade

According to Asgharzadeh, secretary of Iron Ore Association, the cutoff grade of iron ore, as well as its type, which is now limited to magnetic iron ore, must increase to improve the upgrading and processing of hematite iron ore.

Cutoff grade is the minimum grade required by a mineral or metal to be economically mined. Material found to be above this grade is considered an ore, while those below this grade are considered waste materials. The cutoff grade can be determined through a variety of methods, each of varying complexity.

“These developments will take place sooner or later, but the later we come to this understanding, the more we’ll lose our high-quality reserves. It is better for us to correct the prices as soon as possible and pay attention to the extraction processes. If we set the cutoff grade at 40%, the ore below 40% must be removed. The cutoff grade must be reduced to 20% to prevent waste,” Asgharzadeh said. 

Global Prices on the Rise

The price of iron ore is rising in the world. In fact, iron ore registered the highest price increase among industrial metals following China’s pledge to use monetary tools to stimulate the economy and demand for crude metals.

Prices of iron ore traded in Singapore increased by more than 3% to reach $130 per ton, while the prices of base metals, including nickel and copper, continued their uptrend started since the beginning of 2022.

China, which is the world’s largest customer of precious metals, has been engulfed in the recession of real-estate market, financial stress and the ongoing waves of Covid-19 outbreaks. The country’s central bank cut interest rates for the first time in the past two years this week and announced the start of a period of monetary easing.

On Tuesday, Tangshan local government unveiled plans imposing restrictions in winter. A survey by MySteel shows the utilization rate of blast furnaces’ capacity will decrease from 78% to 63% with the closure of 16 furnaces between Jan. 30 and Feb. 20. These shutdowns will reduce production capacity by 60,000 tons per day. 

Iron ore trading prices in Singapore increased by maximum 3.5% to hit $131 per ton; it was traded at $130.75 by 11:30 a.m. local time, while prices in Dalian rose 3.5%. 

Bloomberg reports that amid supply shortages, nickel is being traded at its decade-high and tin has hit a new high in the London metal market. Nickel rose 1.4% to $22,385 per ton, while copper jumped 0.5%.