U.S. Sanctions Target Iran’s Metals
Monday, 9 May, 2019
In brief: the US sanctions are only a “threat” because “it’s very hard to implement them as not all of the export destinations of Iranian steel protect the U.S. interests”, an expert believes.
U.S. President Donald Trump signed an executive order to impose more sweeping sanctions on Iran's iron, steel, aluminum and copper sectors -- which he described as "the regime's largest non-petroleum -- related sources of export revenue."
Iran’s domestic metal industry includes dozen of steel mills, mainly government-owned, that employ about 50,000 workers. Of the 25 million tons of steel produced, Iran exports over 30%, earning nearly $4 billion yearly. Its top markets have been Thailand, the United Arab Emirates, Iraq and Indonesia, according to the U.S. Commerce Department.
About 3,000 factories and workshops produce goods for Iran’s domestic market ranging from kitchen utensils and building frames to offshore oil rigs and military vehicles. It also feeds into Iran’s domestic car manufacturing plants.
The U.S. sanctions are only a “threat”
According to Keyvan Jafari Tehrani, an expert in Iran’s steel and mine industries, the US sanctions are only a “threat” because “it’s very hard to implement them as not all of the export destinations of Iranian steel protect the U.S. interests”.
"Iranian metals have been under sanctions before, with some major manufacturers included in the sanctions list, so the new round of sanctions is a kind of psychological warfare against Iran," said Amir Hossein Kaveh, secretary of Iran's Syndicate of Steel Pipe and Profile Manufacturers. "In the face of previous sanctions Iranian manufacturers have developed new markets in South East Asia, and exports to neighboring countries has been increasing since then."
According to S&P Global Platts, Iranians will attempt to continue exporting to neighboring countries in the Middle East and North Africa region in the case of steel products and to trade partners including China and India in the case of iron ore products, Iranian steel and iron ore sources said.
The U.S. International Trade Administration's Globe Steel Trade Monitor report, published a year ago, classified Iran as the world's 18th biggest steel exporter. The Iranian Steel Producers' Association put steel products exports at 7.9 million mt in the last Iranian year (to March 20), a decrease of just 7.1% on the previous year, despite the secondary sanctions.
Little global impact expected from U.S. sanctions on Iranian metals sectors
Barclays commodities research analysts noted Thursday that Iran "is a relatively small producer of metals in the global context, with its output amounting to less than 3% of the global market of each of the commodities in question, and its exports are even less significant."
As a result, while the sanctions may hurt Iran, Barclays does not expect them to have a significant effect on either global supply-demand balances or prices of steel, aluminum, or copper. While the sanctions may hurt Iran, Barclays does not expect them to have a significant effect on either global supply-demand balances or prices of steel, aluminum, or copper.
U.S. sanctions will not stop the export of steel and iron ore
Iran's aluminum exports to Asia were negligible. In 2018, China imported 160 kg of aluminum foil from Iran. Iron ore, however, is Iran's more critical metals export. The country exported about 15 million mt of iron ore last year - but still only about 1% of all seaborne iron ore trade.
Iran's iron ore pellet exports rose sharply in the last Iranian year (to March 20, 2019), according to Iranian mines and metals state holding firm Imidro. Iranian producers exported some 2.78 million mt of iron ore pellet, valued at $202 million, during the year -- a 658% year-on-year volume increase and 577% higher in total value.
Some 5.52 million mt of concentrated iron ore, valued at $380 million was exported in the last Iranian year as well -- a 399% on-year volume increase and 341% higher in total value.