At the end of the tunnel

In the first five months of the current Iranian year, Iran exported USD2.9 billion in minerals, witnessing a 23% rise compared to the same period last year. This demonstrates the key role the Islamic Republic attaches to the mining sector, which last year registered considerable growth, surpassing USD7 billion in export volume and accounting for 16.5% of non-oil exports.

However, the lifting of sanctions carries the reintroduction of the 10th world’s largest mineral-rich country to the mineral market during a low price environment for raw materials. Therefore, Iran has resolved to halt raw iron ore exports from March 2017, and instead sell processed products that have a higher price in the market.
According to the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), the largest government institution in the Iranian mining sector, steel exports have increased 30% to USD1.1 billion in the first four months of the Iranian year. In this regard, the steel chain represents the largest share in the export of mineral products at 38%, primarily flat steel products. In terms of the potential impact of the steel industry on the country’s trade balance, the government has formulated its vision to reach 55 million tons production by 2025 and increase its share in the global steel market.

The country’s largest producer, the state-owned Mobarakeh Steel Company, is spearheading this ambitious plan by announcing a program to increase its steelmaking capacity to 25 million tons by 2025. With a domestic market share beyond 75%, Mobarakeh will need to look for broader export avenues, also considering its cost competitiveness in a global context. The company has set a target of 2 million tons of steel sheet exports in 2016, with 65% set to target European markets.

Copper is the second most-profitable mineral in Iran’s mining industry, with 75% of the Middle East’s total copper ore production. The country has big plans for the commodity and aims to quadruple annual production to 800,000 tons by 2025. For the time being, Iran exported USD346 million worth of refined copper and copper alloys during the first five months of 2016, rising 900%. The main responsibility of this unseen growth is the National Iranian Copper Industries (NICICO), which currently exports 40% of its production. It is also the largest non-oil exporter in Iran, with overseas sales worth USD1.3 billion. With a big share in China and the Middle East, NICICO is now looking at Europe and India for exporting its products.

Moreover, aluminum also appears to be on the podium of export mineral potential, with Iran aiming to produce 1.5 million tons by 2025 due to rising domestic demand. However, in this case Iran will have to find its position in the market, as last year the country exported its first-ever consignment of aluminum to Tajikistan.

Being absent from the European market for over a decade gave Iran’s Asian competitors the opportunity to to export their own materials to the West. Iran is now trying to regain ground; with better-quality products and a strategic position to reduce transportation costs, the Islamic Republic has started cooperating with top European mining companies to establish a long-term relationship.

On the occasion of President Rouhani’s visit to Europe, Italy’s Danieli Group signed agreements worth USD6.4 billion for a joint venture and orders for the supply of machinery as well as plants to be installed in Iran. Another example of this new relationship between Europe and Iranian miners is the USD1.2 billion contract between industrial giant Mittal Steel and Tourism Financial Group, considered the biggest private sector steel production project in Iran. Both deals were drawn to help Iran export steel products to regional and international markets through partnerships with reputable Western producers. After a decade of being resigned to ostracism, the Islamic Republic is starting to see the light at the end of the mine, and to reclaim its name in the global mining sector.