In the light of possible increase in iron ore prices in the Iranian domestic market caused by higher taxes and levies on iron ore, ownership interests and indications of production stoppages from Gol-e-Gohar, Chador-Malu and even Mobarakeh Steel Company (MSC), MSC has stated that there will be no iron ore price rise until the end of the current Iranian year (ending March 20, 2008).
Mohammad Rajaei, chairman and chief executive officer of MSC, has stated that, since MSC has a fixed-price contract with iron ore producer Chador-Malu till the end of the current Iranian year, the company does not expect any price increase for its iron ore purchases. In addition, Mr. Rajaei stated that MSC has a long-standing partnership with Chador-Mula and so does not expect any unreasonable price rise from this supplier.
In general, MSC expects the current Iranian year to conclude positively with a production increase of eight to ten percent to about five million metric tons. According to Mr. Rajaei, "The growth of Mobarakeh Steel Company's production output caused a positive adjustment in the predicted yield of Mobarakeh Steel Company, and considering the growing trend of steel prices in the world, it is not unlikely that MSC will experience a profit soar this year. Of course, profit increase is a function of the price soar".
MSC believes that the current concern in the market regarding the possible increase in iron ore prices is due to a large extent to the general atmosphere which prevails in the market. MSC added that, whereas prices for iron ore soaring each year, this does not affect steel producers' position in the market.
In addition, MSC stated that if even the price for iron ore increases steel prices might not follow the rising trend, since steel prices depend on the global market trend and also on steel prices on the local Tehran Metal Exchange.
Regarding the issue of alternative iron ore sources, MSC says that all mines are owned by the government in Iran and that steel producing companies only deal with these mines.
MSC purchases its iron ore requirements from Choghart mine, in addition to the Chador-Mulu and Gol-e-Gohar iron ore mines. Each year the company spends about 19 percent of its production cost on the purchase of iron ore. Lately, the company's products have seen a doubling of demand in response to the possibility of iron ore price rises, and this may lead to a steel price increase.
Meanwhile, opinion in the Iranian market has been split in half regarding the effect of the iron ore price rise. Some of the market players believe that the iron ore price increase will lead to an increase in steel product prices, as steel producers will transmit their additional costs to end-users. Meanwhile, others think that iron ore prices in the Iranian market will negatively affect steel mills' profits, and in the long run endanger their expansion projects.