Iran to Abolish Controls on Iron Ore Pricing

EghtesadOnline: Economy Minister Ali Tayyebnia said Iran is set to lift government controls on iron ore pricing in the domestic market.

News ID: ۷۷۴۵۳۲

11 March 2017

“There is a large gap between domestic iron ore prices and international levels, which the government would address by amending the mechanism that determines prices for domestically produced ore,” Tayyebnia was quoted as saying by ILNA on Wednesday.

Tayyebnia noted that pricing on Iran Mercantile Exchange is based on supply and demand, and therefore an appropriate way to determine a practical price for iron ore.

The IME said in January it would launch iron ore trading for the domestic market from February, though no trades of domestic ore have been reported.

According to Financial Tribune, participants in the steel industry have said they do not agree with a pricing system based on supply/demand movement, as it could lead to higher production costs.

The price of iron ore is a proportion of that of steel. For example, the price of pellet is 23% and concentrated iron ore at 13% of the average price of billet traded on Tehran Stock Exchange, which are generally much lower than international prices for the same material.

At present, exported concentrated iron ore is trading at $81/ton Bandar Abbas FOB, with the same material trading at 1.5 million/ton rials ($40/ton) in the domestic market, according to S&P Global Platts.

Iron Ore Export Duty

Separately, Chairman of the Iron Ore Producers and Exporters Association of Iran Qadir Qiafeh said the government’s plan to impose an export duty on iron ore will probably not go ahead.

“Following our negotiations with the government, we were informed in the latest session that the new duty will most likely not come into force,” he said.

“Imposing duties on iron ore export was not a good signal to foreign investors looking at Iran’s mining sector. The low price of iron ore could be considered a kind of dumping by other countries.

The Ministry of Industries, Mining and Trade said in December it was planning to implement a 10% export duty on iron ore and direct reduced iron from the Iranian year starting March 21, 2017.

Customs data showed iron ore exports experienced a sharp rise in the 11 months of the current Iranian year to February 18. The country’s miners exported 18.5 million tons of iron ore, 96.6% of which were shipped to China.