Iran, the world’s 18th largest country, holds huge potential in areas which were largely untapped due to economic sanctions imposed on it. Uncertain social and political climate has also restrained companies from immediate investments in the country. However, with the historic Iran-USA deal about to become a reality, the prevailing economic conditions will see a grand change.
Iran is expected to witness more and more foreign investment inflows. Some big investment proposals have already been floated. One of them is a $3 Billion investment proposed by National Aluminum Company of India, one of the oldest trading partners of the country. However, large scale investments in core consumer based industries would take time. Government support to foreign companies in the initial stages of establishing business will be the key to success.
Iran has received 29 billion US dollars investment in mining sector, mostly from Europe and Asia. The country plans to double its iron ore production by 2025. It is also looking to boost its exports as soon as sanctions are lifted.
Iran ranks among the most mineral rich countries of the world. Mining sector contributes to around 4% to the state GDP; this figure will drop to 0.6% if mining related industries are removed. The underdeveloped nature of the industry is the reason behind such low contribution to Iran economy. Despite this, however, Iran is the 2nd biggest producer of Gypsum and the largest producer of Turquoise in the world. These statistics would improve even further when foreign investments, which is quite low at present, start coming in.
To put things in perspective: Iran holds a massive 7% of the total minerals in the world. Despite sanctions and little foreign investment, Iran has put capital into the mining sector and managed to become self-sufficient in various essential commodities like steel; though, becoming self-sufficient is a very small achievement for a country with such an amount of mineral deposits.
The good news is that Iran’s mining sector will be one of the first to receive Foreign Investment once the sanctions are lifted and the return this under exploited sector would give to the investor will be tremendous. Also, the cost of investment would be low due to commodity slump seen around the world. Hence, this sector presents a golden opportunity for companies around the world.
Iran has strong labor force with more than 55% skilled workers. As of 2014, around 89,000 people are working in mines. Workforce increased by 1.2% in 2014 from the previous year.
From the times immemorial, Iran has had a large mining industry and is a global leader in Turquoise and gypsum production. Iran mostly produces limestone, gravel & sand and iron ore. Production of minerals and metals reached 411,211 thousand tons in 2014 from 307,718 tons in 2010. Mining industry will experience a growth of 8.9% till 2020 on account of removal of sanctions on the country.
Mining is the backbone of Iranian economy and contributes to around 13 percent of GDP. Over 2500 cooperatives registered in Iran are involved in mining activities majorly comprising of sand mining, followed by gravel, and limestone.
Kerman is the biggest revenue generating region in Iran because of mining activities in the area. Apart from mining, Kerman is also famous for its cultural heritage and beautiful sights, making it a major tourism destination in the country. Revenue generated from Kerman region in mining reached 2,590 million rial’s in 2011. After Kerman, Yazd is the biggest mining region in Iran.
Iron ore story
Iron is the largest metal produced in Iran. Production of iron ore reached 41,007 thousand tons in 2014 from 31,029 thousand tons of 2010. Iran is the 10th largest iron ore producer and 14th largest steel producer in the world. Iran ranks 6th in terms of iron ore exports, shipping firms and traders. Chadormalu and Gol Gohar are the largest iron ore producing mines accounting to more than 74% of iron ore production of Iran. Sanctions imposed on Iran have slowed the steel production growth in the country.
Steel production in Iran is set to jump to 33.4 million metric tons by 2020 from 22.1 million metric tons in 2015. Value of Iron ore produced amounted to 74250.12 billion rials in 2014.
Despite seven years of international sanctions, Iran still consumes more steel than UK or France. It is also a major car maker. As economic sanctions eased in February 2015 under a temporary accord, Iran is becoming a hot, untapped opportunity for European and Asian steel exporters, particularly high-grade varieties. Currently, companies supplying certain products including steel still risk punishment from the U.S. and China. 260,000 tons of steel was exported in 2014.
The sector’s sales increased from 22642.4 billion rials in 2006 to 50131.8 billion rials in 2010 to 74250.12 billion rials in 2014, while retail volumes increased from 307.718 million tons in 2010 to 455.17 million tons in 2014. Sales of iron ore decreased from 17321.4 billion rials in 2010 to 12005.1 billion rials. There are 5,246 registered mines in Iran, most of them are held by private players.
Recently, two new coal and iron ore reserves were found in Iran, Kuh-e-Taleb mountain range and Khorasan-Razavi Province in north-eastern Iran, with 120 and 200 million tons of coal and iron ore respectively.