Why Iran is Moving to Halt Exports of Raw Minerals

By Maysam Bizaer, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

Mining could play a pivotal role in all economies, whether directly or indirectly, through providing materials for other industrial sectors. In Iran, the mining sector remains underdeveloped, despite the fact that the country is among the top 10 mineral-rich states. Government control over mines, which leaves little role for the private sector, and exploration problems coupled with lack of modern technology are some of the reasons for the underdevelopment.

Meanwhile, exports of minerals are mainly in the form of raw materials, which generate far less revenue than processed products. As such, the Iranian mining sector currently accounts for only slightly more than 1% of gross domestic product (GDP), even as officials believe that the sector can have a far greater share of the economy. To this end, measures have been taken over the past years to boost the mining sector — among them, an initiative to end exports of raw minerals.

The initiative was first introduced by the Iranian parliament back in 2010, and was included in the bill on the Fifth Five-Year Development Plan (2010-2015). It set the target of ending the selling of raw minerals in the final year of the plan (which ended March 19, 2016). That target, however, is yet to be achieved, with officials now saying that it will be materialized by the next Iranian year (beginning March 21, 2017).

In July, Mehdi Karbasian, head of Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), said that the selling of three key minerals in raw form, including copper and iron ore, will be stopped in the first half of the next Iranian year as domestic demand for iron ore is expected to increase with the inauguration of several processing plants in coming months.

The government says the iron ore, instead of being exported, will be consumed by steel-making plants as well as iron concentrate and pellet making factories. To encourage exports of these products, the government says that exports of processed minerals will be subject to tax exemption while export duties will be imposed on raw iron ore from March. While Iran’s iron ore production has been increasing in recent years, it needs to sustain an annual growth rate of 10% to meet the government’s 2025 target output of over 66 million tons extraction.

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As a primary material for industries such as steel-making, Iran, which is the second-largest producer of steel products in the MENA region after Turkey, has to import an estimated 6 million tons of pellets to meet the demand of its steel-making plants, at prices up to fortyfold that of exported iron ore. To tackle this shortcoming, the government has invested in several iron ore processing plants, some of which recently became operational, bringing the country’s pellet production above 29 million tons.

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