NEW DELHI/LONDON: Iran is raising its exports of iron ore and iron products to China and India in an attempt to replace at least a small part of the massive revenue that has been lost due to sanctions on its oil sales.
While Iran’s oil exports have halved in the last few years due to western sanctions over the country’s disputed nuclear programme, iron ore exports have grown by more than 60 percent over the same period to an annual rate of about 25 million tonnes, worth about $3bn a year at current prices.
The extra billion dollars a year that Iran is gaining from the additional iron exports, however, is still very small when compared with the loss in oil revenue of roughly $35bn a year.
“Sanctions have forced Iran to look at other ways of earning export revenues besides oil and gas, and the mineral sector has been doing pretty well. I know there has been quite a substantial increase in things like iron ore exports,” said Mehdi Varzi, a former official at the state-run National Iranian Oil Co, who now runs an energy consultancy in the UK.
Iran’s oil revenue was $69bn in 2012, according to estimates from the US Energy Information Administration.
It has overtaken India to become the fourth-largest iron ore supplier to China in the last year. Iran’s exports to the world’s top iron ore consumer rose 35 percent to 13.4 million tonnes in the seven months to July, according to Chinese customs figures.
“We’re selling more iron to India and China,” said an Iranian industry source on condition of anonymity. “No money is coming directly to Iran because of the issues with currency (trading in dollars), so in some cases there are some barter deals, otherwise cargoes are paid mostly with cash.”
Mines are “being opened every week” in Iran as businessmen there see it as a profitable business and one of the few sectors not sanctioned yet, said the source. Chinese buyers of iron ore see Iran as a welcome alternative to leading suppliers Australia and Brazil.
While China primarily buys raw iron ore, the Islamic Republic is also boosting its exports to India of sponge iron, often referred to as direct-reduction iron.
Sponge iron is an alternative steelmaking ingredient produced by heating iron ore at a temperature high enough to burn off its carbon and oxygen content and is economically viable where natural gas is abundant and cheap.
Indian makers of sponge iron, the world’s top producers, who are already grappling with high production costs, are suffering from the more aggressive Iranian exports.
Iran, the world’s second-largest producer of sponge iron, has boosted its output of the iron product by about 50 percent so far this year, according to data from the World Steel Association.
Iranian sponge iron exports to India have risen to 80,000 tonnes in April-July from 45,000 tonnes for the whole of fiscal year ended March, said Prakash Tatia, a director at Mumbai-based sponge iron maker Welspun Maxsteel.
Tatia, who is also the vice-chairman of India’s Sponge Iron Manufacturers Association (SIMA), said the data was based on inputs from port sources and traders in India and overseas.
Some of Iran’s growing iron ore production is being used to satisfy higher domestic consumption, since it is trying to make up for a collapse in imports of steel, a sector heavily affected by Western sanctions.