Iran iron ore exports in crisis as prices drop

SINGAPORE/LONDON: Iran’s iron ore industry is in crisis because of low prices, a senior industry official said, with June exports the lowest in nearly two years and ore piling up at ports.

The country’s top non-oil export had been generating much-needed revenue as crude sales drop by $4 billion a month from levels before sanctions on oil kicked in. Nearly all Iran’s iron ore exports go to China and were worth a total of $2.4 billion in 2013, based on Chinese customs data.

But a supply glut, as major iron ore miners rushed to fill Chinese demand that has fallen short of expectations, has pushed prices to half the record seen in 2011. That has hurt smaller and higher cost producers such as Iran, the world’s eighth-biggest shipper of the raw material, opening a gap for the big three of Rio Tinto, BHP Billiton and Vale SA.

Iran’s iron ore exports dropped by a third in June from a year ago to 1.2 million tons, the lowest since September 2012, according to the Iranian Iron Ore Producers and Exporters Association (IRIOPEX).

Keyvan Ja’fari Tehrani, who oversees international affairs at IRIOPEX, told Reuters that falling prices had seen stockpiles at ports rise six-fold and forced around half of private mines to close. “It’s not the same as the global crisis of 2008, but it can be called a crisis.”

Most of Iran’s 38 million tons in output last year came from less than 10 state-owned mines, Tehrani said. Still, he said the loss of half the 11-12 million tons of capacity at its roughly 150 private mines will hit exports hard as 90 percent of private output is shipped overseas, against less than half from the state-owned mines.

Attempts to contact Iran’s Mining Ministry were unsuccessful. An official at the state-owned Iranian Mines and Mining Industries Development and Renovation Organization declined to comment.

The shutdowns are small in a market that saw 1.2 billion tons of ore shipped last year, but will give opportunities for major iron ore exporters Australia and Brazil.

Iran was the fourth-largest supplier of iron ore to China last year, selling 22.4 million tons, dwarfed by top exporter Australia’s 417 million tons.

Its shipments in June were less than half the 2.5 million tons it sent to China in May, and far below 3.2 million tons in April, based on Chinese customs data.

As well as closed mines, Tehrani said iron ore stockpiles at Iran’s two loading ports have ballooned to about 3 million tons from the usual half a million, as exporters hold off on sales in the hope that prices will recover. A similar volume is stuck at private mines, he added.

Tehrani, whose mine in Iran’s southeastern Kerman province has stopped production, said he was not likely to reopen unless prices climbed by at least $20 a ton.

A version of this article appeared in the print edition of The Daily Star on July 19, 2014, on page 4.




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