London — Iran's steel, metals and minerals trade with the rest of the world may be severely curtailed following the United States' reimposition of sanctions against the Middle Eastern nation from Monday.

Not registered? Receive daily email alerts, subscriber notes & personalize your experience. Register Now

The administration of US President Donald Trump is reimposing sanctions on trade in metals and minerals with Iran, (alongside some other products) after the US pull-out in May from the Joint Comprehensive Plan of Action (JPCOA), otherwise known as the Iran Nuclear Deal.

This is set to hit Iran's metals and minerals trade worldwide as the US is also imposing secondary sanctions, involving penalties for other countries trading these products with Iran, including in the European Union where some countries have become increasingly important business partners to Iran since sanctions were lifted after the nuclear deal became effective in early 2016.

European plantmakers and steelmakers including Danieli, SMS, Fives, Sarralle, Outotec and voestalpine have boosted their involvement in Iranian steel production projects since then.

Trade to and from Iran in steel and aluminum products, gold and precious metals, graphite and coal will now be subject to the secondary sanctions.

Iran has become a significant steel exporter in recent years. Total exports of steel and direct reduced iron (DRI), exceeded a record 9 million mt in the Iranian year ended March 20, 2018, according to The Iranian Steel Producers Association (ISPA).

Within this total, exports of semi-finished steel products such as billets and slabs accounted for 6.87 million mt, an 84% jump on the previous year.

Carbon steel imports into the EU from Iran reached 1.1 million mt in 2016, before falling back to 103,400 mt in the first five months of this year following imposition by the EU of anti-dumping duties on Iranian hot rolled coil in October 2017.

Even though Iran's steel traders have in the past lived with sanctions and do not typically use letters of credit, a London-based trader indicated in early August he was not optimistic about the new Iran steel trade scenario and said he would monitor the situation in coming months.

"The impact of the new sanctions on many different aspects such as shipping and payment terms is not clear. It could be difficult especially "any direct and indirect trade of steel is under the secondary sanctions of the United States and some importers may prefer to switch to the other suppliers to avoid this risk," he said.

Importing products into Iran has also become more difficult since the announcement that sanctions would be reinstated, according to local sources.

Steel imports into Iran in early August were reported to have slowed sharply.

Iran has recently been importing mainly flat steel products, mostly from the CIS, but this trade has now virtually halted due to the devaluation of the Iranian rial -- which slumped to a record low against the US dollar in the last week of July -- and the impending sanctions, local sources said.

In addition, Iran has banned any import of billet and some steel long products, the sources said.

The final outcome of European Commission attempts to introduce blocking action against the secondary sanctions was not immediately clear.

According to media reports, the blocking regulation will prohibit EU entities from complying with US extraterritorial sanctions and allows companies to recover damages from such sanctions.

The blocking regulation will reportedly come into force Sunday unless more than half of the members of the European Parliament or the EU Foreign Affairs Council object prior to that date.

Iron ore has not been included in the list of products liable to US sanctions. As virtually all Iran's iron ore exports are destined for China, this trade is not expected to suffer any immediate impact from US sanctions. Iron ore exports have dwindled in recent years due to the need to keep more at home to feed the nation's growing steel production.

Iran exported some 20 million mt of iron ore in the year ended March 20, 2018, down from a peak of 25 million mt/year several years ago.

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

--Laura Varriale, laura.varriale@spglobal.com

--Staff, newsdesk@spglobal.com

--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com