By Mahnaz Abdi

Imposing duty on exports of iron ore a right decision?

November 18, 2019

In a bid to prevent the exports of unprocessed minerals, creating more value added and meeting the requirements of domestic producers for the raw materials, Iran has levied a 25-percent duty on the exports of raw minerals (specially iron ore) since September 23.

While the new duty has satisfied steel producers in the country, it has provoked severe criticisms from those active in the mining sector, as they believe that such sudden decision can be a big shock to investment in this sector.

They say that the shock will be even bigger for the SMEs investing in the mining sector, because under the current economic condition of the country they are seriously in need of the liquidity secured from the exports.

Small mines’ activity coming to a halt

Based on the statistics announced by the secretary of Iron Ore Producers & Exporters Association of Iran (IROPEX), the number of active iron ore mines in the country has fallen from 206 to 123 after imposing the 25-percent duty on exports.

Last week, Saeed Asgarzadeh said that of the 364 iron ore mines in Iran just 123 mines are currently active.

He said, “The Ministry of Industry, Mining and Trade has made an inexpert decision about imposing duty on the exports of raw minerals. Such decision contradicts their motto of activating small mines. It damages production and has led to stopping activity of some small mines.”

Profit should be distributed in the whole chain of steel

Believing that the profit should be distributed in the whole chain of steel, the vice chairman of IROPEX says that the steel producers should modify their method of purchase from the mines.

On November 16, Ali Safarian said, “Even if a 100-percent duty will be levied on iron ore exports, the condition will not change for the steel producers; in fact, they should take another approaches for resolving their problems. They should modify their method of purchase and should not impose their expenses on producers and exporters of iron ore or the whole chain of steel.”

When the owners of mines sustain losses with the low prices, they prefer to set up iron ore pellet and concentrate production units, but not sell the iron ore at any price to the steel producers, he commented.

Duty has not resolved steel producers’ problem

Bahram Shakouri, the chairman of Mines and Mining Industries Committee of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), is of the opinion that imposing duty on the exports of raw materials has not removed the problem for the steel producers.

Last week, he said, “We oppose any duty on the export of any commodity, and it’s not just about the chain of steel. It is logical that surplus of any product should be exported, for example we have a surplus of hematite in the country which should be exported without any duty.”

“We surely need more iron ore in the future to materialize our outlook of [the Iranian calendar year] 1404 (March 2025-March 2026), but when the duty is imposed in the first stage of the steel chain, it will discourage the investors which will definitely make the steel producers face problems for supply of the raw materials in the future”, he commented and concluded that the wrong policies have caused exports to take priority over domestic needs.

Preventing exports of raw materials an important issue

While there are many opponents of the new duty, the decision is strongly supported by many officials in the government and parliament.

Speaking to the media at the time when the duty was imposed, the vice chairman of the parliament’s Industries and Mines Committee said that preventing exports of raw materials is one of the most important issues currently followed up in the country, because sales of raw materials brings profit less than selling the processed products.

Reza Alizadeh said, “Export of iron ore accounts for the lion’s share of Iran’s raw minerals exports and therefore it creates high income and job opportunities for the other countries rather than our own country.”

Seyfollah Amiri, the director general of Mining Industries Department of the Ministry of Industry, Mining and Trade, is the other supporter of the mentioned duty.

He predicts that through this duty, the annual export of unprocessed iron ore from Iran will be less than five million tons in the current Iranian calendar year (ends on March 19, 2020), while the figure was 8.5 million tons in the past year.

According to the official, the country has exported 2.2 million tons of the product worth $542 million during the first five months of the current Iranian calendar year (March 21-August 22), which was about 30-40 percent lower than the figure of the same period of time in the previous year.

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