An Indian state company has agreed to sell high-quality iron ore pellets to Iran, its chairman told Reuters, in what could be a $200 million annual deal that signifies expanding business ties between the countries as sanctions against Tehran ease.
India had remained one of Iran’s top oil buyers despite trade curbs over Iran’s nuclear programme and the two countries are now exploring partnerships worth billions of dollars in ports, steel, aluminium and power.
Iran and India started talks on the pellet deal even before the United States, European Union and United Nations earlier this month agreed to lift sanctions on Iran, in exchange for Tehran agreeing to long-term curbs on its nuclear programme.
KIOCL Ltd, owned by India’s steel ministry, could sell as much as 2 million tonnes of pellets to Iran to meet substantial local demand, Chairman Malay Chatterjee said.
Keyvan Ja’fari Tehrani, head of international affairs at the Iranian Iron Ore Producers and Exporters Association, said a final agreement was yet to be struck. But he agreed the demand was there.
“The production of pellets in Iran is not sufficient,” Tehrani said, adding there’s a need to import between 7 and 8 million tonnes a year. Iran produced 21 million tonnes of iron ore pellets last year while demand reached 28 to 29 million tonnes, he said.
KIOCL has been in talks with Tehrani as well as Iran’s state-owned mines and metal holding company IMIDRO and the Iranian Mines and Mining Industries Development and Renovation Organisation, said Tehrani.
Negotiations are also going on to bring in 1 million tonnes of low-quality iron ore from Iran, process it at KIOCL’s coastal facilities in India, then export pellets to Iran, said Chatterjee.
A senior steel ministry official confirmed the talks.
KIOCL will initially buy 80,000 tonnes of high-grade concentrate containing 67 percent iron from Anglo America’s Brazil operations by September, convert it into pellets and then sell to Iran for about 500 million rupees ($7.8 million), Chatterjee said.
Based on that figure, the value of a 2 million tonne deal would be about $200 million.
Most of Iran’s iron ore is low grade and needs to be converted to pellets to be used to make steel. It is targeting annual steel output of 55 million tonnes by 2025, up from about 16 million.
South Korea’s POSCO, the world’s fifth biggest steelmaker, said earlier it had been in touch with several Iranian firms seeking to do business after sanctions were lifted.