Iran's huge steel growth plan is not yet disrupting the seaborne iron ore pellet markets and isn't expected to do so in the near term, steel and iron ore market sources said this week.
Above all, bar all the technical and economic challenges of growing DRI-based (direct reduction iron) steel production and the iron ore mines and pelletization units to match, politics may limit interference in Persian Gulf markets, a source attending an industry event in Dubai said.
Iran has cut imports of pellets and may export the material for now. Its potential swing supply and purchasing role in iron ore pellets is yet to get into gear.
Iron ore and pellet producer Golgohar plans to start exporting iron ore pellets by the end of the current Iranian year on March 20, 2017, Keyvan Jafari Tehrani, head of international affairs at Iropex, the Iron Ore Producers and Exporters Association of Iran, said Wednesday.
"With pellets premiums at $20 [or above] it's feasible to export," Tehrani said.
"There is currently a 15% export duty on pellets exports [from Iran], but this should be removed in 2017 because Iran is now self-sufficient in pellets," the Iropex source said.
Further, he went on to add that export taxes on DRI should also be lifted because Iran is self-sufficient in DRI, and in fact now the biggest DRI producer in the world.
Iran may not be able to produce sufficient DR grade pellets to specifications regional buyers are accustomed to, a seaborne pellet supplier said. Export volumes may be limited with more focus on DRI and HBI exports a possibility, he suggested.
"Saudi Arabia dictates a lot of what happens in the region and we see no way Iran can politically be able to enter into trade with the regional mills," he said.
Another pellet supplier said sales to Iran were not viable for listed companies due to sanctions, and business complexity dealing in Iran would limit attractiveness. Iranian attendees at a steel conference in Dubai were limited this year, he added. Iranian iron ores can have high silica and sulfur and be detrimental in some plants, he said.
Currently, the DR pellet market is so tight that any supply may be more easily extended into sales and potentially help loosen market segments by grade and supply base, directly or indirectly.
Iranian companies are not very interested in Gulf Cooperation Council countries for pellet exports.
Vale Oman and Bahrain Steel are regionally important producers of DR pellet, establishing a solid customer base in the region.
Iran may focus on supplying China and India more, while export duties on iron ore and DRI are currently being approved by the government. For DRI and HBI, European and Eastern Asian markets are being targeted. Iran exports iron ore to China.
Iran does not intend to export iron ore pellets for long and exports are due to be stopped altogether when new steel project launch. Iran may return to become an importer of pellet or concentrated iron ore within a few years. Many miners are reluctant to consider sales of pellets to Iran based on sanctions, and preference to supply traditional customers with any additional volume.
Iran exports DRI from Bardsir to Kuwait, but the GCC is not considered to be very important for raw material exporters.
Iran's total nominal pellet making capacity is currently 29.5 million mt/year, according to the government. Depending on the iron grade, there may be sufficiency for around 20 million mt of DRI output.
DRI nominal capacity is 28 million mt/year, according to the government.
A 55 million mt/year steel output plan by 2025, which is long held by the government is if facing pressing questions regarding steel markets, investment potential, water and also infrastructure.
Iran has started in parallel investment for infrastructure such as port facilities alongside the Persian Gulf, railroad development and a water supply pipeline project.
