The extension of US sanctions on Iranian iron ore exports is not expected to have a significant impact on the market.
Global iron ore supplies are already facing pressure from an expected 50mn-75mn t shortage this year — the result of Brazil's Vale cutting sales following the tailings dam collapse in Brumadinho in January. But China receives 94pc of Iran's iron ore output and US sanctions have done little in the past to deter such trade.
Iran's domestic market accounts for 4pc of production, with the remaining 2pc exported to India and countries including Turkey, Egypt and Gulf Co-operation Council (GCC) members.
"The US sanctions on Iranian iron ore exports might not have a large impact. The impact will be only on iron ore concentrates and pellets, which could be offset by domestic ores," a Shanghai-based trader said.
Iranian market participants say they expect Iranian iron ore exports to continue, albeit with the potential for increased risks and costs to buyers. Exporters and their customers have been navigating these kinds of challenges since the US reimposed sanctions on Iran last year.
But there remains concern that sanctions will push up prices. "We had expected Iranian exports to increase to 20mn t this year as a result of the Vale supply issues. Now, Iranian iron ore exports are likely to [be close to] zero for as long as these sanctions last," analysts at investment bank Jefferies said.
Iran exported an estimated 17mn t of iron ore in the Iranian year ending 20 March 2019, government data show. Its iron ore pellet exports increased more than sevenfold on the year to 2.78mn t, driven by a cut in export duty to 5pc from 15pc in July 2018. Tehran cut duty to stimulate exports and take advantage of strong global demand and high seaborne market premiums. Iran exported 5.52mn t of concentrate in the period, up nearly fivefold on the year, reflecting strong Chinese demand.
Following the US' decision yesterday to impose sanctions on Iranian industrial metals exports, Iran's plea for assistance from the nuclear deal's remaining signatories — China, France, Russia, the UK and Germany — was met with sympathy but little in the way of action.
China's foreign ministry spokesperson, Yan Shuang, said China "resolutely opposes the US unilateral sanctions against Iran... and regrets that the US practice has further aggravated the tension on the Iranian nuclear issue".
The sanctions announced yesterday also target Iran's exports of steel, aluminium and copper.
Sanctions on steel are likely to be limited, but they could continue to curb demand for Iranian material in the global market, reducing competition for CIS billet sellers, for example. Some global re-rollers have already turned away from Iranian slab, and are sourcing from the CIS instead. CIS coil prices have been high compared with Iranian coil prices, because of some mill outages. But the market is starting to cool, despite reduced Iranian exports. Sources in Iran suggest that exports will continue.
