Platts- Iran is set to lift government controls on iron ore pricing in the domestic market, Tasnim News Agency reported Wednesday, citing the minister of economic affairs and finance, Ali Tayebnia.

Tayebnia was quoted as saying there was a large gap between domestic iron ore prices and international levels, which the government would address by amending the mechanism that determines prices for domestically produced ore.

Tayebnia also said pricing on the Iran Mercantile Exchange (IME) was based on supply and demand and was, therefore, an appropriate way to discover a practical, as well a clear, price for iron ore.

The IME said in January it would launch iron ore trading for the domestic market from February, though no trades of domestic ore have been reported.

Participants in the steel industry have said they do not agree with a pricing system based on supply/demand movement as it could lead to increased production costs.

The price of iron ore is a proportion of that of steel. For example, the price of pellet is 23% and concentrated iron ore at 13% of the average price of traded billet on the Tehran Stock Exchange, which has generally much lower levels than international prices for the same material.

At the moment, exported concentrated iron ore is trading at $81/mt Bandar Abbas FOB, with the same material trading at Iranian riyal 1.5 million/mt ($40/mt) in the domestic market.
IRON ORE EXPORT DUTY
Separately, the chairman of the iron ore producers and exporters association of Iran (Iropex), Ghadir Ghiafeh, said the government's plan to impose an export duty on iron ore will probably not go ahead.

"Following our negotiations with the government, we have, within the latest session, been informed that the new duty will most likely not come into force," Ghiafeh said.

Imposing duties on iron ore export was not a good signal to foreign investors looking at Iran's mining sector, he said. Also, low price of iron ore could be considered as a sort of dumping by other countries, Ghiafeh said.

The ministry of industry, mines and trade said in December it was planning to implement a 10% export duty on iron ore and direct reduced iron (DRI) from the Iranian year starting March 21, 2017.

Customs statistics showed iron ore exports experienced a sharp rise in the first 11 months of the current Iranian year to February 19. The country's miners exported 18.5 million mt of iron ore, 96.6% of which was shipped to China.