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September 2018, No. 88


IMIDRO Exclusive

Share of Mining & Mineral Industries

Iran’s mining and mineral industries sector is the most serious rival of the oil sector in the country’s development, GDP growth, sustainable employment and exports. Therefore, if the rules and regulations are revised and investment is facilitated, the return on capital will be very good for the country. In the past few years, the mining and mineral industries sector has a better position and this trend is improving thanks to the efforts of IMIDRO (Iranian Mines and Mining Industries Development and Renovation Organization) and the support of the Ministry of Industry, Mine and Trade. 

Record Export of 9m Tons of Steel

In the calendar year1396 (2017/18), our foreign trade witnessed the rise of steel exports. One of the main goals of the mining and mineral industries sector in Iran is the growth and development of the steel industry. The first steel mill, Esfahan Steel Company, started work in 1350 (1971/2) with an annual capacity of 550 thousand tons. Today, Iran’s steel production capacity is more than 38 million tons. The country succeeded for the first time to export 9.2 million tons of steel to the five continents worldwide. Iran, on the other hand, has developed direct reduction technology thanks to its gas advantage and has overtaken India and is the first country in sponge iron production. 

22% Share of Mining & Mineral Industries from Foreign Trade in 2017/18

In 1396, the share of mining and mineral industries sector from total foreign trade reached 22%. The figure was 16% by 1394 (2015/16). The value of exports in this area exceeded $10.7 billion in the 12 months of 1396, while $5.4 billion worth of mineral products and mineral industries were imported. Therefore, the balance of this sector is highly positive. The share of this part of imports was also 9.3%. In terms of tonnage, in the last year, the export sector recorded a negative growth of 7.8% and a total share of 46%. In import sector there was a negative growth of 96% and a total share of 15%. 

Mining and Mineral Industries Foreign Trade in 2018

In the first quarter of 1397 (March to June 2018), we saw a 12% decrease in exports (in weight) and a 16% increase in exports (in value). During this time, steel exports grew by 30% in weight and 63% in value.

Imports also dropped by 28% in weight and 18% in value in the same period. In total, in the first quarter of the current calendar year, the export of mining and mineral industries was 2.4 times higher than imports.

Approval of Export Duty for Raw Materials

In the current calendar year, the government has been authorized to use a variety of incentives to process raw materials and convert domestic goods with low value added as well as imported goods into goods with high value added. Imposition of any duty on export of unsubsidized goods and services and raw materials and goods with low value added not demanded domestically or without technical and economic justification for processing inside the country, by considering a certain percentage of the global market share to the discretion of the Ministry of Industry, Mine and Trade is prohibited. The level of duty on other raw materials and low value added goods should not reduce or stop the production of raw materials or low value added goods. On the other hand, the revenues from export of raw materials and low value added goods are intended to encourage export of high value added goods associated with the same raw materials and value added products in the annual budgets.

Efforts to process minerals with high value added can be one of the factors that many activists in mineral industries believe its implementation can increase the share of mining sector in the economy and, in addition to creating employment in less developed and deprived areas, will also increase the development of these regions. On the other hand, the processing of raw materials can increase the value added of these materials, thereby increasing the share of this sector of exports. This is what the 12th government also firmly believes in to the extent that Minister of Industry, Mine and Trade Mohammad Shariatmadari says that we should not generate revenues by crude sales in the mining sector, but we should also take big actions in the field of exploration in order to witness the creation of mineral industries in different sectors of the country. To realize this goal, we need to change the way the exploration works. Exploration must come out of its traditional state and it must be done in line with production for exports. This is a policy the 12th government has focused from the beginning of its takeover. It is trying to increase the amount of mineral resources and the share of this sector in the economy by increasing explorations. IMIDRO as the forerunner in developing explorations has carried out more than 270,000 square meters of explorations since 1393 (2014/15). 

Proposed Duty for 12 Groups

According to a decision adopted by the Supreme Economic Council, export duty has been proposed to be levied on raw minerals for 12 groups. In this approval the export duty of raw minerals or minerals with low value added for the current year and the next two years (2019/20 & 2029/21) is considered. Examination of the export duty table indicates that the projected duty for the said period of time is between 5% and 10%. For 1397 (2018/19), the proposed duty for export of raw minerals or minerals with a low value added is set at 5%; for 1398 (2019/20) is 8%; and for 1399 (2020/21) 10%.

The forecast of three proposed rates for the mentioned three periods takes place under conditions that the 5% duty is repeated for some of the sub-tariffs of the 12 predicted groups. This means that some mineral products will have the same export duty this year and in the next two years.

According to the proposed table by the Ministry of Industry, Mine and Trade in Group 1, there are ‘ron ore and its concentrates,’ including red hot iron pyrite, which has 8 sub-tariffs. All the proposed duty for the sub-tariffs of the said group for 1397 is 5%, for 1398 is 8%, and for 1399 is 10%. The only sub-tariff that enjoys the proposed rate of 5% over the three periods is related to ‘compressed iron ore (pellets)’.

In the second group too, there are ‘iron oxides and hydroxides; colored soils containing 70% or more of Fe2O3’. There are also three sub-tariffs for this group. In the third group (manganese oxide) there are two sub-tariffs. The fourth and fifth groups are allocated to ‘copper and its concentrates’ and ‘lead rock and its concentrates’. ‘Zinc and its concentrates’ are also considered one of the other 12 groups that have been set export duty, with 5 sub-tariffs. However, for ‘Zinc Oxide, Zinc Peroxide Group’, which has three sub-tariffs, the proposed duty considered for four periods is 5%. ‘Chromium and its concentrates’ and (oxides and chromium hydroxides) are two other groups that are subject to export duty.

But for ‘marble, travertine, ecaussine and other limestone rocks for lathes or buildings with a bulk density equal to or more than 2.5’, there are also 8 sub-tariffs. The tariffs in the subgroup of this section, other than ‘marble and travertine’, whose duty during the three-year period is 5-10%, in other cases is 5%.

It is reminded: The best way to invest in Iran is the one leading to the production of higher value added products and also the one in the course of export. Duties and constraints, as well as incentives and supportive laws designed to support national production and export of high value added products that generate more GDP growth as well as sustainable employment, are being developed and reformed. Export-oriented investments in less developed regions of Iran have good benefits and incentives.

 

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  September 2018
No. 88