The news that sanctions on Iran would be lifted will have some implications for aluminium.
When I visited Tehran in 2014, the local aluminium industry was very much looking forward to the day when the sanctions would be lifted.
At present, Iran has to import both alumina and aluminium. Its smelters need alumina, but the sanctions prevent normal international trade, with most of the world’s banks not interested in issuing Letters of Credit. So Iran has been paying for the alumina it buys by shipping raw metal to the buyers. It’s a form of tolling. But that leaves not enough aluminium to satisfy the domestic market. Metal is a much more openly traded product, and as with many other products it is possible to set up some complex financial connections to allow the trading to take place.
With the veil of sanctions lifted, Iran will be free to source alumina from multiple sources, and to pay for it directly in cash, not kind. That will have the effect of reducing demand for metal in the country, so sales of aluminium to Iran will drop.
In the longer term, Iran will be more able to source capital and technology for new smelters - not that it needs technology. China is already a major player in Iran, with both NEUI and Chalieco involved in projects. But massive projects such as aluminium smelters need capital, and perhaps with sanctions lifted, there may be some interest in being the early arrival.
Another area where Iran’s game may change is in carbon. Presently Iran buys calcined coke and anodes from China and some CPC from India. The lifting of sanctions may cause some other suppliers to go knocking on Iran’s doors.
In this area too, capital is needed. I was briefly involved in a project to build a calciner in Iran in 2014, and one of the biggest problems with the project was that it could not find capital. The CPC if it is made will be a very nice coke, highly suitable for anodes, but someone has to get in there. When I spoke to the project owners, they hadn’t even considered selling the CPC into the export market.
There will be all sorts of other players who will see Iran as a future market potential. Some suppliers to the aluminium industry were supplying the country through middle men and backdoor payment processes, but those practices may soon be redundant. How long before we see the carbon and other supplying companies appointing agents and setting up local offices in Iran?
How long before we see raw materials people from Iralco and Salco at TMS?
The feature image is a shot I took while driving through Tehran in 2014.
Comments
You have raised an interesting topic Paul - thanks. One point to mention however is that the US will still maintain a trade embargo with Iran and as such US companies (and controlled foreign subs) are still not permitted to trade with Iran. The removal of the so called secondary sanctions will improve the trade between the aluminum industry in Iran and non US companies. Like Cuba, some of us will be watching from the window!
Thanks Michael. So those companies who are working with the Iranians now will get a head start over their American competitors.