(Minews) - Iran is to delay the introduction of a 10 percent tax on exports of unprocessed iron ore until March next year, a source with knowledge of the plan said, as the market is struggling and a number of private mines in the Islamic state have been halted.
A 31 percent fall in iron ore prices this year, stoked by increased shipments from major suppliers Australia and Brazil, has led to a sixfold jump in stockpiles at Iranian ports as
exporters held off sales, leading to the closure of around half the private mines at one stage.
"The government has agreed to postpone the tax to the beginning of next year because right now the market is too low and they're afraid to lose the market when they apply this
duty," said a source who met with officials of Iran's Ministry of Mine, Trade and Industry this month.
He was referring to Iran's financial year, which runs from March 21 through to March 20 of the following year. The tax was originally due to be introduced this year.
The plan is to gradually increase the export duty to 20 percent, according to the source, who owns one of the iron ore mines in Iran that has been temporarily shuttered and declined to be identified because the delay has yet to be publicly announced.
Emails seeking comment from Iran's Ministry of Mine, Trade and Industry were not answered and other attempts to reach the ministry were also unsuccessful.
Iran already imposes a 40 percent tax on exports of iron ore concentrates and a 30 percent duty on pellets based on free-on-board prices.
The government was looking at imposing the 10 percent tax on iron ore fines and lump as a way of both supporting its fledgling domestic steel industry and cashing in on its biggest
non-oil export.
Western countries have imposed sanctions on Iran because of its nuclear programme, which they fear could be aimed at developing a nuclear weapons capability. A July deadline for
reaching a deal was missed but talks have been extended for four months.
The sanctions involve, among other things, some financial transactions plus trade in oil, petrochemicals, gold and precious metals.
Trade in iron ore is not directly covered and shipments of the raw material have been generating much-needed revenue for the country as crude sales dropped by nearly $4 billion a month compared to levels before tougher sanctions took effect in 2012.
Nearly all of Iran's iron ore shipments go to China, which bought $2.4 billion worth in 2013, based on Chinese customs data. Iran is the fourth-biggest iron ore exporter to the world's top market, although its shipments are well below those of Australia and Brazil.
SEABORNE SUPPLYIron ore prices dropped to $89 a tonne in June, the lowest since September 2012, although they have since bounced back and stood at $93 on Tuesday.
The recovery has encouraged some of the private mines in Iran to reopen, although total exports in July still only reached 1.065 million tonnes, according to the source. That
would be below the 1.2 million tonnes shipped in June, already the lowest since September 2012.
Given the global supply situation, any sustained recovery in the price looks unlikely in the medium term.
It fell through $100 in May amid a global surplus that Morgan Stanley expects to reach 79 million tonnes this year, doubling to 158 million tonnes in 2015.
That reflects efforts by top miners such as Rio Tinto and Vale to boost output, edging out
smaller players with higher costs such as those in Iran.
Vale plans to lift annual iron ore exports to about 400 million tonnes within five years from 270 million tonnes in 2013, Jose Carlos Martins, the miner's head of ferrous metals, said this month.
Morgan Stanley sees global seaborne iron ore supply growing by around 330 million tonnes over the next three years, while demand will rise by only 194 million.
The lion's share of the supply increase will arrive this year and next and would come from Vale, Rio, BHP Billiton and Fortescue Metals Group , it said.
"This forecast growth in seaborne supply should be viewed as a near certainty, as the vast majority of new tonnes entering the market are at the low end of the cost curve and spending is committed," the bank said in a report on Monday.
