China traders cut back Iran iron ore purchases ahead of tariff hike

Chinese companies are looking to Africa and Southeast Asia to replace Iranian iron ore, now subject to new 25 percent export tariffs. (AFP)
Updated 22 September 2019

China traders cut back Iran iron ore purchases ahead of tariff hike

  • Iran shipped 319,920 tons of iron ore to China in August, down 37.8 percent from July

BEIJING: China took fewer shipments of iron ore from Iran in August and September, according to Refinitiv Eikon data, as additional export tariffs due to be imposed by Tehran have dampened risk appetites in the world’s biggest steelmaker.

Iran’s deputy minister of industries said earlier this month that exports of all steelmaking raw materials will be slapped with a 25 percent tariff to meet domestic demand, according to Iran’s state-backed’s Press TV.

The tariffs, which will cover various products from Iran’s iron mills, including iron ore and concentrates, will come into effect from Sept. 23.

Iran shipped 319,920 tons of iron ore to China in August, down 37.8 percent from July and 23.4 percent lower than a year earlier, according to Reuters calculations based on vessel-tracking and port data compiled by Refinitiv.

In September so far, China has taken 129,534 tons of iron ore from Iran, according to the same calculations and data.

“Not many traders buy iron ore from Iran because of the US sanctions,” said Zhao Yu, an analyst with Huatai Futures, adding that the freight charges are also high.

Two Chinese traders told Reuters they could only use cash and telegraphic transfers as payment methods, as it was “too sensitive” to go through banks for transactions with Iran.

“The main advantage of Iran ore is it’s low cost,” said a trader who buys 2 million to 3 million tons of iron ore from Iran a year.

“If (Iran’s) prices go up (from the tariffs), they can be totally replaced by other mainstream ores,” he said when asked why China would not buy more, adding that they had been announced at short notice.

“There’s not enough time to buy, load and clear customs.”

The trader said his company was considering substituting iron ore from Africa or Southeast Asia for ore produced in Iranian mills.

Iran’s Ministry of Industry, Mine and Trade and customs department did not respond to requests for comment.

Iran shipped a total of 17 million tons of iron ore to overseas markets in the fiscal year ended March 20, 2019, according to data from the Iranian Mines and Mining Industries Development and Renovation Organization.

China, the world’s biggest iron ore market, consumes about 90 percent of Iran’s exports of the material. China bought 14.7 million tons of iron ore from Iran in 2018, accounting for 1.4 percent of its total imports.

“Applying such export tariffs from this month is too early,” said Keyvan Jafari Tehrani, an independent analyst of the iron and steel industry.

“I doubt whether the quantities (Iran) used to sell to China can be absorbed totally by the local market at the beginning.”


Lufthansa accepts tweaked demands by Brussels over state bailout

Updated 30 May 2020

Lufthansa accepts tweaked demands by Brussels over state bailout

  • Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump

BERLIN/FRANKFURT: Lufthansa’s management board has accepted a more favorable set of demands from the European Commission in exchange for approval of a $10 billion government bailout, the carrier said on Saturday, paving the way for its rescue.
The agreement comes after the airline’s supervisory board on Wednesday rejected an initial deal with Brussels including conditions that were significantly more painful.
Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump due to the coronavirus pandemic.
Under the latest agreement, Lufthansa said it will be obliged to transfer up to 24 takeoff and landing slots for up to four aircraft to one rival each at the Frankfurt and Munich airports.
This translates into three take-off and three landing rights per aircraft and day, it said, confirming what sources had earlier told Reuters.
“For one-and-a-half years, this option is only available to new competitors at the Frankfurt and Munich airports,” Lufthansa said, initially excluding budget carrier Ryanair. “If no new competitor makes use of this option, it will be extended to existing competitors at the respective airports.”
The previous deal had included forfeiting 72 slots used by 12 of 300 jets based at the Frankfurt and Munich airports, a source familiar with the matter said.
The slots, to be allocated in a bidding process, can be taken over only by a European peer that has not received any substantial state aid during the pandemic, Lufthansa said.
The Commission said once it has been officially notified by Germany on the aid package it will assess the issue as a matter of priority.
“(Lufthansa’s remedies will) enable a viable entry or expansion of activities by other airlines at these airports to the benefit of consumers and effective competition,” it said in a statement.
The airline’s supervisory board needs to approve the deal, Lufthansa said, adding it would convene an extraordinary general meeting to obtain shareholder approval for the bailout.
The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20 percent stake in Lufthansa, which could rise to 25 percent plus one share in the event of a takeover attempt. A deal would also give the government two seats on Lufthansa’s supervisory board.
Rivals such as Franco-Dutch group Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines are all seeking state aid due to the economic effects of the pandemic.
Germany, which has set up a $110 billion fund to take stakes in companies hit by the pandemic, said it plans to sell the Lufthansa stake by the end of 2023.
“The German government, Lufthansa and the European Commission have reached an important intermediate step in the aid negotiations,” the Economy Ministry said in a statement.
It said talks with the Commission over state aid would continue.