Iran is likely to become a merchant direct reduced iron supplier to international markets. This is due to its low energy costs and plentiful availability of iron ore, according to Iranian Steel Producers Association board member Bahador Ehramian.

Moreover, increased scrap availability and usage by mills globally of scrap as feedstock will require a “… clean” metallic as a complement, Ehramian says in a presentation obtained by Kallanish. This will be particularly so in flat steelmaking electric arc furnaces, he adds. The potential development of blast furnace-grade DRI could also be a “… game changer” for the industry.

Iran has 3.3 billion tonnes of definite and a further 2.5 billion tonnes of prospective iron ore reserves, of which 75% are magnetite and 25% hematite. Average Fe content is 51% versus a global average of 42%.

Lower Chinese iron ore demand coupled with new beneficiation capacity in Iran are re-orientating Iranian iron ore trade towards the domestic market. Iron ore production cost in Iran is lower than the ‘big four’ global producers, but mine-to-port transport and freight costs are currently higher.

The government is likely to attract more investors into iron ore mining, as well as explore new deposits for exploitation. “The fractured ownership of the industry in addition to world class low production costs will guarantee to offer competitive mineral input for downstream domestic users in the future,” Ehramian says.

Iran’s steel exports doubled on-year in the Iranian year through 19 March 2016 to 4.1 million tonnes, as producers aimed to ease excess supply at home. This occurred as apparent consumption in Iran fell a cumulative 6mt over three years. Government infrastructure spending, which plummeted to $2 billion last year from $30 billion in 2012, is expected to recover this Iranian year.

“It seems the existing capacities are well position to meet any local shortages but not all are geared towards competition in export markets,” Ehramian observes.

Iranian apparent rebar consumption increased 11% on-year in the year through 19 March to 6.23mt. However, flat product use declined -2% to 9.5mt and sections use fell -39% to 1.01mt. Higher rebar consumption “… could be result of over stocking considering that almost 25% of cement kilns have been idled,” Ehramian says.