25% Duty Proposed on Iron Ore Exports from Iran

EghtesadOnline: The Ministry of Industries, Mining and Trade has proposed a levy of 25% customs duty on iron ore export.

News ID: ۷۴۸۳۹۰

08 September 2019

According to director general of the ministry's Mineral Industries Office, Seifollah Amiri, the proposal has been sent by Industries Minister Reza Rahmani to the Cabinet for approval.

If approved, the new duties will come into effect on Sept. 23, the ministry's news service Shata reported.

The proposed duty is aimed at preventing the export of unprocessed minerals, generating more value-added and fulfilling the needs of domestic producers, according to Financial Tribune.

“With this decision, the sale of unprocessed iron ores will fall under 5 million tons [annually],” Amiri said.

A total of 17 million tons of iron ore were exported from Iran in the last fiscal year (March 2018-19), figures released by the Iranian Mines and Mining Industries Development and Renovation Organization show.

Iron ore in the form of fines/lumps had the lion’s share of exports with 8.84 million tons, followed by 5.52 million tons of iron ore concentrate and 2.78 million tons of iron ore pellet.

IMIDRO data show exports of iron ore concentrate, iron ore fines/lumps, and iron ore pellet earned $380.95 million, $258.75 million and $201.92 million respectively, meaning such exports earned a total of $840 million during the period under review.

According to Amiri, exports during the five months to Aug. 22 hit 2.2 million tons worth $542 million.

“We value exports but since major production units with vast investments have been established in the country, employment cannot be weakened at the expense of exports,” he said in an interview with Donya-e-Eqtesad economic daily, adding that only products in excess of domestic demand are exempt from export duties.

Concerns Over Iron Ore Shortage

In an interview with ILNA, the industries minister noted that a shortage of iron ore in future has become a cause for concern for the ministry.

He says investments should be increased in iron ore mines to make up for the shortage.

“Advanced machinery, equipment and financial resources are required to solve the issue, but currently the financial means are not available,” he said.

According to Rahmani, 10% of Iran's iron ore output are exported.

“The ministry’s policy is to prevent the sale of raw, unprocessed resources and create value-added. When it is felt that the domestic market needs the raw materials, we forbid or increase duties on exports,” he added.

According to Nematollah Mohseni, an official with Esfahan Steel Company, the excessive export of iron ores has caused many steelmakers, including ESCO, to operate below capacity, IRIB News reported.

Amir Hossein Kaveh, secretary of the Syndicate of Steel Pipe and Profile Manufacturers, said the whole steel production chain has gotten used to exporting raw, unprocessed products since global demand is high and exporters enjoy easy money from shipping their products without the need of processing or creating value added.

Iran was the sixth largest supplier of iron ore to China by shipping about 22 million tons to the world’s largest importer of iron ore in 2017.

Top ore exporters to China in 2017 were Australia, Brazil, South Africa, India, Ukraine and Iran respectively, according to Chinese customs statistics shared with Financial Tribune by senior market analyst, Keyvan Jafari Tehrani.

Shipments to China make up about 91% of Iranian iron ore exports. Accounting for nearly 70% of world’s seaborne ore trade, China imported 1.07 billion tons of iron ore in 2017, up 8% YOY, SteelMint reported.

What spurred iron ore demand is the industrial goliath’s crackdown on pollution, as the government mandated steelmakers to use higher-grade ores to curb pollution, buoying imports from high-content ore producers.

The exports came as a host of negative factors such as India’s plan to boost shipments, Iran’s high finished prices and the Iranian government’s plan to slap tariffs on iron ore exports threatened the sector’s foothold in China.

Iran accounts for about 3% of global iron ore reserves estimated at 4.5 billion tons with over 200 ore deposits.

According to the United States Geological Survey, Iran holds the world's 10th largest iron ore reserves.

A new iron ore deposit was discovered in Iran's Yazd Province in 2017, which is estimated to be about 2 billion tons with a 70% iron content, according to the head of Yazd Industries, Mining and Trade Organization.

“This mine is globally and nationally unique in terms of reserves and content, and will be a significant boon to provincial industries and the country as a whole,” Mohammad Reza Alamdar-Yazdi was also quoted as saying by Mehr News Agency.

Alamdar-Yazdi noted that the reserves were discovered at a depth of 1,500 kilometers.