EghtesadOnline: Iranian iron ore miners experienced a good year in 2017, as they became the sixth largest supplier of the material to China by shipping about 22 million tons to the world’s largest importer of iron ore.
Top ore exporters to China in 2017 were Australia, Brazil, South Africa, India, Ukraine and Iran respectively, according to Chinese customs statistics shared with Financial Tribune by senior market analyst, Keyvan Jafari Tehrani. Shipments to China make up about 91% of Iranian iron ore exports. Accounting for nearly 70% of world’s seaborne ore trade, China imported 1.07 billion tons of iron ore in 2017, up 8% YOY, SteelMint reported.
What has spurred iron ore demand is the industrial goliath’s crackdown on pollution. The government is mandating steelmakers to use higher-grade ores to curb pollution, buoying imports from high-content ore producers.
Iranian miners are skating on thin ice, however. A host of negative factors such as India’s plan to boost shipments, Iran’s high finished prices and the Iranian government’s plan to slap tariffs on iron ore exports threaten the sector’s foothold in China, Financial Tribune reported.
India Pushing for Larger Market Share
India is planning to scrap export tariffs on above 58% content iron ore so that it can have a larger share in the Chinese market.
“The new tariffs will move further down the line to cover more than 62% content ore shipments,” Jafari told Donya-e-Eqtesad.
A rising force among exporters to China would impact Iran’s standing in the market.
China continues to be the largest destination for Indian iron ore exports in 2017. It made up 82% or 16.23 million tons of total iron ore exported from India last year. Other major destinations were Japan with 2.62 million tons and South Korea with 610,000 tons, SteelMint’s data revealed.
Indian iron ore exports to China increased by 14% YOY in 2017.
Granulated Iron Ore Shipments to Diminish
Iran’s breakeven price for iron ore concentrate shipments to China is $49 per dry ton CFR China for state-owned exporters and $66 for granulated ore by private miners.
The average grade for state-owned firms is 65% and 56-58% for private producers, with annual production standing at 12 million and 4 million tons respectively.
The input, compiled this month using company reports, Platts, HIS and Macquarie Research data, highlights Iran’s fragile position compared with competitors in the case of an overall average ore price drop.
The Australian-British miner Rio Tinto, for instance, has a breakeven price of $26 with an average grade of 62% and 328 million tons of output. The multinational BHP Billiton boasts of $31 breakeven price and India’s pellet exporters follow with $33.
“… This means that if the average iron ore price in 2018 drops below $66, which is highly possible, granulated iron ore exports for the private sector will effectively cease to continue, just like 2014,” Jafari said.
Macquarie Research has forecasted 62% content iron ore to be priced at $50-55 and about $55 CFR China, raising the alarm for Iran.
What this translates to is that Iran will turn into ore concentrate exporter in the next fiscal year (starting March 21) and cut granulated shipments.
If market dynamics are bound to limit granulated ore shipments on their own, what is the point of export tariffs the government is touting?
For years, the government has vowed to stop the exports of what it calls “unprocessed” minerals, granulated iron ore included. It has backtracked on the decision every year, however, following criticism from miners and the private sector.
But the issue seems to be back on the agenda, according to Deputy Industries Minister Jafar Sarqeyni, who recently announced that a 15% export tariff will be set on shipments as of the next fiscal year.
Officials claim the move is meant to sway miners to prioritize supplying domestic consumers, but according to Jafari, “implementing export tariffs on iron ore … will be pointless” as Iran’s global presence in the market will diminish next year anyway, and requires no push from the government.