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Factbox: Little global impact expected from US sanctions on Iranian metals sectors

New York β€” The latest US sanctions on Iranian metals may hit ferrous metals harder than nonferrous, with Iranian sources saying Thursday that the country's steel expansion program could be slowed down further.

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US President Donald Trump signed an executive order Wednesday targeting Iran's iron, steel, aluminum and copper sectors, which he described in a statement as "the regime's largest non-petroleum-related sources of export revenue."

Iran has been planning to increase its crude steel output from about 25 million mt/year currently to 55 million mt/year by 2025.

ANALYSIS: New US sanctions seen having little impact on Iran steel exports, but will hit imports

Barclays commodities research analysts noted Thursday that Iran "is a relatively small producer of metals in the global context, with its output amounting to less than 3% of the global market of each of the commodities in question, and its exports are even less significant."

As a result, while the sanctions may hurt Iran, Barclays does not expect them to have a significant effect on either global supply-demand balances or prices of steel, aluminum, or copper.

TRADE FLOWS

**Metals traders in Asia said Thursday the impact of US sanctions on the Iranian copper and aluminum sectors would be marginal because Iranian exports to the region were limited.

**Iran's major trading partners are China (27%), India (15%), South Korea (11%), Turkey (11%), Italy (6%) and Japan (5%), according to the US CIA World Factbook.

**China imported 314,181 mt of copper concentrate from Iran in 2018, or just 2% of its total imports of 20 million mt, according to General Administration of Customs data.

**China's copper cathode imports from Iran in 2018 were 15,230 mt compared with its total imports of 3.3 million mt.

**Japan and South Korea imported no concentrate or cathode from Iran in 2018, customs data showed.

**Japan imported just 41 mt of scrap copper from Iran in 2018.

**Iran's aluminum exports to Asia were negligible. In 2018, China imported 160 kg of aluminum foil from Iran.

**Iron ore, however, is Iran's more critical metals export. The country exported about 15 million mt of iron ore last year - but still only about 1% of all seaborne iron ore trade.

**Iranian iron and steel executives consulted Thursday noted that the new US sanctions will not stop the export of steel and iron ore.

**Keyvan Jafari Tehrani, head of international affairs at Iropex, the Iron Ore Producers & Exporters' Association of Iran, said Wednesday evening that even while the news of the latest US sanctions was "unfortunate and may affect exports of some these (metals and mine) items," business with some major trading partners was expected to continue.

**A major impact of the new sanctions will be to increase shipping costs due to higher ship insurance charges, sources said.

**Iran's iron ore pellet exports rose sharply in the last Iranian year (to March 20, 2019), according to Iranian mines and metals state holding firm Imidro. Iranian producers exported some 2.78 million mt of iron ore pellet, valued at $202 million, during the year -- a 658% year-on-year volume increase and 577% higher in total value.

**Some 5.52 million mt of concentrated iron ore, valued at $380 million was exported in the last Iranian year as well -- a 399% on-year volume increase and 341% higher in total value. Iranian non-concentrated iron ore exports fell by 53% in the period to 8.84 million mt, according to Imidro.

**Trade of steel, aluminum, graphite and coal with Iran was already subject to restrictions after the August 2018 sanctions -- yet steel exports have continued, albeit at reduced rates.

**Iranian steelmakers exported 5.54 million mt of steel in the last Iranian year (to March 20), a 25% decrease compared to the previous year. (This Imidro data excludes exports by smaller private-sector producers.)

**Iranian mills exported 1.65 million mt of rebar in the last Iranian year (to March 20) mainly to neighboring countries - a 177% increase compared to the previous year, data from the Iranian Steel Producers Association (ISPA) shows.

INFRASTRUCTURE

**Iran is producing primary aluminum at a roughly 325,000 mt annualized rate for 2019, S&P Global Platts estimates, based on information from the Islamic Republic News Agency (IRNA), Iranian mines and metals state holding company Imidro, and other sources.

**The 2019 annualized rate of copper cathode production in Iran is about 240,000 mt, according to Platts estimates.

**Platts estimates that Iran's crude steel production is running at a 25 million mt annualized rate this year, based on year-to-date data from Worldsteel.

**Iran's finished steel output increased to 21.6 million mt in the last Iranian year (to March 20), a 9% increase on year, according to the latest report published by ISPA.

**Semi-finished steel output was up by 13% year on year to 24.7 million mt, including 14.2 million mt of billet and 10.5 million mt of slabs, most of which was converted into finished products by domestic mills.

**Iranian rebar output reached a record high during the period at 7.82 million mt, 25% more than in the same period last year.

**Some 2.54 million mt of cold-rolled coil was produced by Iranian mills, 10% more than in the same period last year, and about 7.94 million mt of hot-rolled coil was produced, a 3% increase.

**Beam production decreased by 8% on year to 1.03 mt, and output of coated flats totaled 1.46 million mt, a 3% decline.

**Iran's direct-reduced iron (DRI) output increased more than one fifth in January/March, according to the World Steel Association. Some 6.91 million mt of DRI were produced by Iran in the three-month period, a 21.7% increase on 2018.

**According to the latest Iran Steel Development Plan report, nominal capacity of Iran's DRI production is 33 million mt/year but some 5.8 million mt/year of new capacity will be added in a year and 19.6 million mt/year total through 2025 -- making it the world's largest DRI producer.

-- Joe Innace, joseph.innace@spglobal.com

-- Mayumi Watanabe, mayumi.watanabe@spglobal.com

-- Diana Kinch, diana.kinch@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com