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Government Price Fixing Hugely Benefits Iran Steel Producers

A general view of Gol-e Gohar Iron Ore mine in Sirjan some 1050 kms southeast of the capital Tehran.

A lawmaker in Iran says iron ore prices dictated to mine owners hugely benefits steelmakers as they purchase the ore at half the international price but sell their products at 5 to 10 percent higher.

The Iranian government dictates prices for various products, from food to electrical goods, fuel and commodities in a complicated attempt to regulate the markets.

Speaking at the Mining Council of Kerman Province on Thursday, chairman of parliament's economic commission, Mohammad-Reza Pourebrahimi said steelmakers enjoy "an economic rent" of 40 trillion rials (approximately $95 million) annually due to the discrepancy between the real and dictated prices for the mineral.

The price of iron ore is determined by the government after negotiations between mine operators and steel producers. Unlike iron ore, the price of steel has been considerably liberalized so producers can sell at international prices or higher while mining companies can only sell their products (such as fine ore, pellets and concentrate) at the dictated price.

Many so-called "privately-owned" steel companies are at least partly owned and controlled by government agencies such as the state workers' retirement fund.

The southern Kerman Province has some of the largest iron ore and copper deposits in the country. Mines including Gol Gohar mine in Sirjan supply the county's steelmakers.

According to the statistics of the Organization for Development and Renovation of Mines and Mining Industries, half of the 5.2 million tons of iron ore produced in the country in the first two months of the current Iranian calendar year (beginning March 21), was produced by Gol Gohar.

According to the Chairman of Iron Ore Producers and Exporters' Association Iran produces 80 million tons of iron ore a year, 90 percent of which is processed domestically.