Iran: Price ceiling on exchange distorting steel market - Official

A price ceiling on the sale of semi-finished steel products at the Iran Mercantile Exchange (IME) distorts prices through the steel production chain, including encouraging iron ore miners to sell in overseas markets rather than domestically, said Saeed Shirkand, the Vice President for Economic Coordination and Supervision in the Iranian government.

Major Iranian iron ore miners, including Gol Gohar, had recently met the ministry of industry, mines and trade to change the formula currently adopted to set iron ore prices so that domestic ore prices can increase.

Currently, iron ore fines and lump are priced at 7.5% of domestic billet price, concentrate priced at 16%, pellet at 23% and DRI at 50% of the billet price. Miners are urging increasing the coefficient for iron ore fines/lump to 9.5%, concentrate to 21%, pellet to 27% and DRI to 53%.

However the Iran Steel Producers Association (ISPA) has opposed the miners' proposal as they believe the current coefficient is fair and iron ore prices in Iran are in line with global trends. Iranian steel producers point out that the price ceiling on billet at the IME is the major distortion factor for the steel supply chain and if that were removed, iron ore prices will reflect actual market demand. They add that changing the coefficients for setting iron ore price would make steel more expensive in Iran.

Shirkand advised the government's Program and Budget Organization and steel industry to mutually work on a vision 2025 goal of producing 55 mntpa crude steel. He asked steelmakers to focus investments for achieving this goal. Iran needs 160 mn t iron ore fines/lumps, 80 mn t concentrates, 76 mn t pellets, 56 mn t DRI and 50 mn t billet to produce 55 mtpa crude steel by 2025.