Iranian iron ore exporters stay the course

Exports of Iranian iron ore have remained steady in the face of escalating tensions in the Mideast Gulf and there are few signs that China, which receives about 95pc of these volumes, will fall in line with US government sanctions.

In a climate of a tighter pellet supplies, and Brazilian producer Vale confirming a 15mn t shortfall to 45mn t/yr in its total pellet production this year, Chinese buyers are unlikely to turn their backs on Iranian material, despite its pellets typically being of a lower grade compared with Brazilian material. Iran exported an estimated 17mn t of iron ore in the Iranian year ending 20 March 2019, government data show.

Even after the US renewed Iran nuclear sanctions in August last year, Iran's exporters have maintained their shipments of iron ore to China by re-routing them via third-party ports and re-exporting volumes so that cargoes do not have to officially nominate Iran as the country of origin, market participants told Argus. Iranian exporters are also employing tactics that they are less keen to reveal at the moment, traders said.

More recently, the US government imposed sanctions on Iranian industrial metals exports in May that have not appeared to have significantly dented shipments.

Several Iranian iron ore cargoes have been sold for October delivery, with buyers having made advance payments for them.

But these sanctions have not left Iranian exporters unscathed, and buyers taking advantage of the seasonal summer lull in demand and citing pressure from US sanctions are pushing for discounts on their iron ore cargoes from Iran.

Tighter margins for mills from high iron ore prices and falling steel prices are also starting to put pressure on Chinese mills that are purchasing more port stocks instead of seaborne cargoes. The Argus daily 62pc Fe iron ore fines cfr Qingdao assessment stands at $118.20/dmt today, up from $94.05/dmt three months ago, while portside 62pc Fe iron ore fines seaborne equivalent price is at $119.95/dmt, up from $91.60/dmt in the same period.

Still, the US is starting to exert more pressure on China regarding its sanctions on Iran. Following Iran's seizure of a UK-flagged oil tanker on 19 July, the US government yesterday imposed sanctions on Chinese state-owned trading firm Zhuhai Zhenrong for allegedly continuing to take Iranian crude.

China responded with criticism. "China firmly opposes the US imposition of unilateral sanctions and so-called 'long-arm jurisdiction' on China and other countries invoking its domestic law," China's embassy in the US said. "We urge the US to immediately correct its wrongdoing and earnestly respect other parties' legal rights and interests."