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 nearly $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 tonnes, 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 tonnes 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 tonnes of capacity at its roughly 150 private mines will hit exports hard as around 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 Organisation declined to comment.
BACK TO BALANCE
The shutdowns are small in a market that saw 1.2 billion tonnes of ore shipped last year, but will give opportunities for major iron ore exporters Australia and Brazil.
"Any kind of shutdowns will be good because they will restrict supply and eventually (tilt) the balance back to being a sellers' market," said James Wilson, an analyst at Morgans in Perth.
Iran was the fourth-largest supplier of iron ore to China last year, selling 22.4 million tonnes, dwarfed by top exporter Australia's 417 million tonnes.
Its shipments in June were less than half the 2.5 million tonnes it sent to China in May, and far below 3.2 million tonnes 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 tonnes 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 tonne.
Iron ore has been among the hardest hit industrial commodities, with prices falling more than a quarter this year. After breaching $100 a tonne in May for the first time since September 2012, prices fell as far as $89 in mid-June before recovering to $98 this week. .IO62-CNI=SI
A Reuters poll in early July showed some analysts expect prices to drop as low as $80 next year, as global miners forge ahead with an expansion binge and China's once-stellar economic growth slows.
"When prices were at $100, $120-plus, a lot of cargoes used to come from Iran. But now we hardly hear any offers," said an iron ore trader in Shanghai.
Unlike iron ore from most big suppliers, some Iranian ore contains large amounts of sulphur, a pollutant that Chinese mills are avoiding as Beijing tries to improve air quality.
Iranian iron ore has to be deeply discounted to compete with higher quality cargoes from Australia and Brazil, said another trader based in China's eastern Shandong province who used to buy Iranian cargoes.
The price for Iranian ore containing around 60 percent iron fell to $59 a tonne, on a free on board basis, from $91 in January, while the 53/52-percent grade has halved to $30, said Tehrani at IRIOPEX.
"Iron ore is still moving, but it seems to me traders or miners are doing so because of old contracts," said Jalal Tabrizi, managing director of Iranian shipping agency Seacargo Co Ltd.
Source: Reuters
- metaljunction »
- Metal News
Metal News & Events
METALJUNCTION PUBLICATIONS
Coal Insights (English) Monthly
Coal Insights is a ready reckoner for anyone associated with coal. This publication is aimed at tracking everything related to coal in India.
India Coal Market Watch(English) Monthly
ICMW is a one-stop source for all news, data and research pertaining to coal demand, consumption, stocks, spot- and long-term prices with respect to the Indian Market.
India Steel Market Watch (English) Monthly
ISMW is a brand new high-end steel market report, covering all aspects of the steel industry in India.
Steel Insights(English) Monthly
Steel Insights delves into various facets of the domestic and global steel industry such as market fundamentals, raw material price trends, price forecasts etc.