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Iran aluminum output threatened

By Mehrdad Balali

TEHRAN, June 7 (Reuters) - Government price regulations seriously threaten Iran's fledgling aluminum output, raising concerns among producers of possible heavy losses, Iran's Mine and Metals Minister Eshaq Jahangiri said on Wednesday.

``The main problem facing producers is that they have to sell their products at 30-40 percent below market prices. This has led to two different prices for aluminum in Iran,'' Jahangiri told Reuters in an interview.

``(Regulated) prices are even below production costs. If there is no adjustment to prices, or production is not subsidised, they will suffer losses. We have serious concerns.

``We hope to be able to solve the problem. If aluminum production is hurt, market prices will rise further,'' he said.

The minister said the government was planning to create a local metals exchange market to allow metals to be traded.

``We hope to be able to eliminate the double rate for aluminum through the local metals market,'' he said.

Iran has two aluminum smelters. The state-owned IRALCO in central Iran produces 120,000 tonnes of aluminum a year, one- third of it for export.

The semi-private Al-Mahdi in southern Hormozgan province operates 15 percent below annual capacity of 110,000 tonnes.

Jahangiri said aluminum smelters had difficulty obtaining raw material from abroad.

He said the sector largely swapped locally-produced aluminum ingots for alumina from foreign companies, or made periodic purchases from the London market.

But producer were moving towards more long-term and systematic purchases for better production planning, he said.

Industry officials say some 200 manufacturers of aluminum products were producing below 20 percent of their capacity because of a shortage of raw material.

Iran consumes an average 160,000 tonnes of aluminum a year.

Many factories are using scrap recycling to fabricate aluminium products, a trend which lowers quality.


As opposed to other minerals, Iran lacks vast bauxite reserves.

Jahangiri said Iran was studying a proposal by a Russian firm to extract aluminum from alunite and other alternative minerals.

He said Iran was also finalising talks with Gulf-based ACD on a $150 million project to expand the Al-Mahdi facilities, which include a refinery, a smelter and a power plant.

An Italian firm is next in line for that project, which seeks to raise annual output to 220,000 tonnes in five years.

Iran also eyes a long-term project for a huge smelter in the energy-rich Bushehr Gulf port, in view of an ambitious plan to raise annual aluminum output to one million tonnes in less than a decade.

So far, few have come forward for these projects, which are part of 100 projects worth $10 billion offered a year ago for international tender.


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