Mining Machinery Imports Fail to Meet Domestic Need

EghtesadOnline: About $141 million worth of mining and road construction machinery were imported into Iran in the fiscal 2021-22 (ended March 20)

News ID: ۷۵۱۹۰۹

23 September 2022

Iran’s import of mining machinery is minimal compared to the global average.

A total of $34.5 million of mining machinery were imported to Iran during the first four months of the current fiscal year (March 21-July 22), registering a 3.2% rise compared with last year’s corresponding period.

According to the latest report released by Tehran’s Chamber of Commerce, Industries, Mines and Agriculture, about $19 million of the total sum pertained to import of used excavators, registering a 600% year-on-year rise.

Germany, Malaysia, South Korea, Japan, the UAE, China, Oman and Turkey were the main exporters of mining machinery to Iran during the period, of which the UAE, with a share of 67% in total exports, was the main supplier, IRIB News reported.

About $141 million of mining and road construction machinery were imported into Iran in the fiscal 2021-22 (ended March 20), registering a 2.9% rise compared to the year before.

About $54 billion worth of mining and road construction machinery were imported in 2021, registering a 42% rise compared with 2022.

The US, Canada, Russia, Germany and the Netherlands were the biggest importers of mining and road construction machinery and among the developing countries, Russia, Indonesia, Poland, Chile and Thailand had the highest volume of imports in 2021.

Among the neighboring countries, Turkey ranked first with import of $643 million, followed by Saudi Arabia with $431 million and the UAE with $390 million.

Aging Fleet

The average age of Iran’s mining machinery is currently around 40 years old, according to the head of the House of Industries, Mining and Trade.

“One reason [why the machinery have not been renewed] is that they are too expensive due to the high rates of foreign exchange in Iran [against the rial]. This makes small mines unable to afford their required equipment,” Abdolvahhab Sahlabadi was also quoted as saying by Mehr News Agency.

The official added that there is also a shortage of mineral machinery spare parts in the domestic market.

“There are more than 15,000 units of mining machinery in Iran over 20 years old, which need to be replaced,” deputy minister of industries, mining and trade, Reza Mohtashamipour, was quoted as saying by IRNA.

Noting that a part of the aging fleet may be renovated, he said the rest need to be imported.

Referring to restrictions on import of mining machinery in Iran, the deputy minister emphasized that imports are allowed only of machinery that are not produced domestically.

“Imports of machinery that can be produced domestically are banned,” he said.

“The import of mining machinery has been hindered by negotiations with two domestic producers,” says the deputy head of the Mines and Mineral Industries Commission of Iran Chamber of Commerce, Industries, Mine and Agriculture, Mehrdad Akbarian.

He explains that producers are lobbying to suspend import until they can sell their products.

“Unfortunately, the government’s imposition of preconditions and complicated bureaucracy for the import of mining machinery means restrictions remain in the way of imports of mining machinery,” he was quoted as saying by the news portal of ICCIMA.

Stressing that Iran currently needs about 25,000 new machines in its mining fleet, he said, “To solve this problem, in addition to domestic production, we need to import at least 5,000 machines per year.”

He said as domestic production is limited both in terms of quantity and type and even in terms of quality, shortage of various types of mining machinery should be seen to as soon as possible via imports.

“We need to use specialized mining machinery to lower costs. These machines do not exist in sufficient numbers, nor do domestic manufacturers have plans to produce them. This is while specialized machinery can change the conditions of our mines and lower mining costs and increase our competitiveness with other countries,” he added.

Akbarian concluded that restrictions on the import of much-needed mining machinery has caused heavy losses for miners.

Large Mines Operating at Half Capacity

The ban and restrictions on imports of mining machinery has led to Iran’s large mines operating at 50% of their full capacity and the country’s small- and medium-sized mines on the verge of closure, the deputy head of Iran Mine House, Hamid Reza Amirian, said earlier.

“This is a disaster for our mining industry. It has been a few years since the ban has come into effect. The decision was made on faulty grounds to begin with,” he was quoted as saying by the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture.

The official explained that after banning automobile imports a few years ago, the government somehow put mining vehicles in the same category. Mining companies cannot import 100-ton and 150-ton dump trucks and 200-ton and 300-ton loading machinery.

“Officials say the reason behind this ban is to offer support to domestic production of these machinery, whereas there is no such thing as domestic production of most mining machinery. These heavy machinery are produced by only six or seven companies worldwide. Under the current circumstances, we cannot become a producer,” he said.

Amirian noted that there are 5,000 abandoned mines and 3,000 gravel and sand mines that need machinery to be able to resume operation.

“Our local production cannot even meet 10% of their demand for machinery,” he added..

Noting that economic sanctions imposed on Iran don’t allow the import of new machinery, Amirian said, “We can only purchase secondhand ones, which too is not allowed because we have ‘sanctioned’ ourselves.”

Four Times the Global Price

Hesameddin Farhadi, the head of Mining Commission with Isfahan Chamber of Commerce, has said that due to the ban, Iranian miners have had to purchase mining machinery at four times the global price.

“A secondhand loader is priced at around $115,000 in the international market but due to the shortage of this heavy machine in the domestic market, we have to purchase it for up to130 billion rials [around $400,000],” he added.

According to this official, most of the mining machinery used in Iran today were imported in fiscal 1985-86, which has decreased efficiency in the mining sector by 50-60%.

“Mining machinery are means of production, yet officials in the Ministry of Industries, Mining and Trade have somehow put them in the same category as luxury goods! Due to a shortage of foreign currency reserves, instability of the economy and in a bid to lend support to local production, imports of luxury cars have been banned and the same was applied to mining machinery and vehicles. These officials need to reconsider their decision and exclude means of mining production from the regulation,” he added.

Akbarian had earlier noted that two factors have impacted the price of mining machinery over the years.

“One is the depreciation of the Iranian rial against the dollar and the other is the shortage of these machines in the local market. The latter has made matters much worse. If a machine is valued at, for example, $80,000 in the international market, you cannot buy it for less than $160,000 in Iran, because the options are very limited.”

Referring to a decline in investment in the mining sector, he said the industry is facing a series of problems these days, but the ban on imports is the most pressing issue at present.

“Not all countries set up production lines to meet their demand; they purchase them from the existing global brands and instead, launch businesses offering sales services, spare parts and maintenance,” he said.

Gov’t Support Causes Trouble

According to Alireza Baqeri, the head of the Mining Commission of Birjand Chamber of Commerce, around 20 years ago, Heavy Equipment Production Company (HEPCO) made strategic mistakes in its decisions and planning in a way that it came close to bankruptcy a few years ago.

“Because they want to bring it back into the game, the government banned the import of mining machinery,” he said.

HEPCO is an Iranian corporation that manufactures construction equipment, railcars, trucks, forklifts and industrial machinery in oil, gas, energy, metal and mining industries in Arak, Markazi Province. The company is the largest heavy equipment manufacturer in the Middle East. It was established and registered in 1972, with the intention of assembly and production of heavy equipment.

Noting that government support to HEPCO has in effect spelled trouble for mining companies, he said, “More than 7,000 mines in the country are waiting for HEPCO to see if they can provide the required machinery or not. Some 70% of Iran’s mines are small-sized. HEPCO is not capable of manufacturing their demand for small machinery either, let alone heavy ones.”

Noting that Iranian miners are in urgent need to renew they fleet, Baqeri said, “Loaders, bulldozers, graders and excavators are not luxury automobiles and the fact that they have gone under the same category is absurd.”

Iran’s Mineral Riches

Iran is home to 81 types of minerals with reserves totaling 37-40 billion tons, according to Alireza Shahidi, the head of Geological Survey and Mineral Exploration of Iran.

“Construction materials, including gravel, rubble stones, sand and different types of stones, account for 62% of Iran’s mineral reserves, metal minerals constitute 10-15% of total reserves and the rest are non-metallic minerals,” he said.

According to the United States Geological Survey, Iran holds the world's largest zinc, ninth largest copper, 10th largest iron ore, fifth largest gypsum and barite, and 10th largest uranium reserves.

Overall, Iran is home to more than 7% of global mineral reserves.

Overall, Iran is home to more than 7% of global mineral reserves