Iran one of the largest Iron ore exporter and crude steel manufacturer has recently come up with a decision of decreasing the export duty on pellets from 15% to 5%. This decision is believed to counter the US sanctions by creating a scope to attract the buyers.
The nation has witnessed a dramatic increase in export of pellets during the CY’18 as compare to CY’17. During CY’17, Iran exported 0.28 MnT mainly to China, but in CY’18 (Jan-Jun’18) only in six months, the nation has already touched the exports of 0.28 MnT. With this new decision, exporters will try to avail more profit by exporting more pellets.
Exchange realization is also an important factor which motivates miners to sell their products overseas. Miners get better realization, when they sell their product overseas as compare to selling it in domestic market.
Adverse Effect on Domestic Market
One of the major and legitimate problem of Iranian steel industry with respect to raw materials is the consumption of raw material is more than the production. According to an International Steel Technology company based out of Iran, “The required capacity of pellets in Iran is around 75 MnT, whereas the current pellets capacity of nation is around 42.60 MnT and around 32.40 MnT of pellets is needed. With this new decision of reducing export tariffs can have devastating effects on domestic consumers.
Morteza Ali Akbari, Deputy Economic and Financial Assistant of the Ministry of Investment and Development of Mines and Metal said, “The volume of pellets production in Iran is not so high to support the recent decision by the Government to reduce export duties on pellets from 15% to 5%. Many steel companies which owns a pellets manufacturing plant, has to buy pellets from other manufactures in addition to using their own pellets to fulfill their raw material needs.
He added “So reducing export duties cannot be reasonable.” In such a situation, the tariffs and duties on the export of pellets should be increased so that producers are not encouraged to export, and the domestic needs of the companies will be supplied to the pellets from the same domestic producers.
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