Beijing: Competition in the global iron ore market has become so intense as low-cost supplies surge that Iranian shippers have abandoned efforts to court overseas sales and will seek $20 billion (Dh73.4 billion) to develop a domestic steel industry that may get a boost from the end of sanctions.

Iran planned to more than triple steel capacity to 55 million tonnes in the next 10 years, potentially helping consume 120 million tonnes of domestic ore, Keyvan Jafari Tehrani, head of international affairs at the Iranian Iron Ore Producers and Exporters Association, said in an interview in Qingdao. Instead of seeking to sell ore into China, Tehrani’s in Asia’s top economy to promote the idea of made-in-Iran steel and court potential investors.

The country reached a deal with international powers in July to ease sanctions in exchange for curbs on its nuclear program, and the rapprochement will pave the way for expanded access for overseas companies. The biggest iron ore miners including Australia’s BHP Billiton Ltd. and Brazil’s Vale SA have boosted low-cost output, seeking to increase sales, cut costs and win market share. The strategy spurred a glut, helping prices sink to the lowest since at least 2009, and ratcheted up pressure on less-efficient rivals such as Iran.

Tumbling exports

“There’s no way we can compete with majors such as BHP and Vale,” Tehrani said on Wednesday. Iranian exports to China are forecast to slump to 5 million to 7 million metric tons in 2018 compared with 23.5 million tons two years ago, according to Tehrani, who added that the drop won’t diminish the worldwide glut as the biggest mining companies will continue to add supply.

Ore with 62 percent content delivered to Qingdao lost 22 percent this year to $55.30 a dry ton on Wednesday, according to Metal Bulletin Ltd. The material, which bottomed at $44.59 in July, retreated 47 percent in 2014 as the surplus built and demand growth slowed in China, the world’s largest consumer.

Banks from Goldman Sachs Group Inc. and HSBC Holdings Plc have said there’s a battle for survival in the seaborne market where only the most efficient miners are likely to last. Apart from Vale, BHP and Rio Tinto Group, the industry was facing an existential challenge, Goldman said in April.

Biggest losers

Iran is among the biggest losers as China has reduced exports from suppliers outside Australia, Brazil and South Africa, according to Caue Araujo, Sydney-based iron ore industry director at the research company AME Group.

In the first seven months of 2015, China purchased about 64 million tons from suppliers outside those nations compared with 111 million tons in the same period a year earlier, he said by phone. The trend is expected to continue and it’ll put a lot of marginal suppliers under pressure, Araujo said.

A shortage of roads and railways have added to miners’ logistics costs in Iran, according to Tehrani. Even shipping is uncompetitive given small vessel sizes and loading rates that are a fraction of what countries like Brazil are capable of doing, he said.

Iran has $29 billion of mining investments attracting interest of companies from Europe to Asia, Mehdi Karbasian, deputy minister of Iran’s Ministry of Industries, Mines & Trade, told Bloomberg last month. Karbasian also flagged the plan to increase steel capacity to 55 million tons by 2025.

The mining industry is looking forward to end of sanctions as the sector will be able to access global know-how to upgrade technology that’s 10 to 15 years old, Tehrani said.

“An upgraded mining sector can help Iran reduce reliance on oil income” and unlock the nation’s mineral wealth, Tehrani said. “We can reduce our reliance on steel imports, while supplying domestic demand and even be able to export 14 million tons of steel a year by 2025.”