HONG KONG/BHUBANESWAR, India (Reuters) - Iran has hiked purchases of alumina from China and India in the past two months as the country scrambles to shore up supply after the U.S. tightened sanctions on raw and semi-processed materials at the start of July.
Western measures targeting Iran’s disputed nuclear programme have hit many sectors of its economy including industries producing steel and other metals, where it is heavily dependent on imports. Tehran says its atomic work is peaceful.
Tightened U.S. sanctions came into effect on July 1 that extended a ban on aluminium metal to cover raw and semi-finished metals as well. China and India have won waivers from any U.S. sanctions on their financial system related to trade with Iran because they have cut imports of Iranian oil.
China’s alumina exports to Iran jumped to record levels in June and July, customs data shows, while India’s national aluminium producer has awarded an alumina tender to Iran’s national smelter in the past two months, company sources say.
“Iran has historically had a decent-sized aluminium industry. Given the savage squeeze in the international sanctions against it, clearly it’s easier for Iran to do these kind of transactions with countries like China,” said Nic Brown, an commodities analyst at Natixis in London.
“Particularly if they are handled as some sort of barter arrangement, where China gets its energy and in return it provides raw or intermediate goods,” he added.
Alumina is a refined version of the raw ore bauxite. It is typically used to make aluminium, but in its high purity form it can have sensitive military applications.
But the price of the material would indicate that Iran’s imports from China and India are likely to have been of lower quality smelter grade alumina rather than the high-purity material known as chemical grade, traders said.
Chemical grade alumina can have military uses, such as to make ceramic composites used in missiles and armour.
The prices Iran paid for the material from India and China were less than a quarter of that for chemical grade material.
Aluminium alloys can be used to make tubes for uranium enrichment gas centrifuges. Most newer gas centrifuges are made of a carbon composite material, though Iran’s current centrifuge programme in operation is based on aluminium. Aluminium is also used in everything from cars to aircraft, buildings and cans.
China, the world’s top producer and consumer of alumina, exported 15,072 tonnes to Iran in July and 15,078 tonnes in June, customs data showed.
That compared with sales to Iran of 553 tonnes for the whole of last year, out of China’s total 2012 alumina exports of 43,293 tonnes, customs data shows.
It is unclear from official customs data which companies have been selling to Iran and where the alumina was produced.
Sources in international and Chinese trading houses said the alumina recently shipped to Iran probably came from China’s bonded warehouses, where the alumina has not paid China’s 17 percent value-added tax, which means the metal was most likely produced outside of China.
Iran has been paying a premium to domestic Chinese prices, making the metal attractive to re-export rather than import into China, traders said.
In India, the National Aluminium Co Ltd (NALCO) (NALU.NS) has awarded a sell tender to the Iran Aluminium Company (Iralco), two sources said.
The European Union sanctioned Iralco in December 2012 for supplying aluminium to The Iran Centrifuge Technology Co (TESA), which is a subsidiary of the Atomic Energy Organization of Iran (AEOI).
Swiss trading giants Trafigura and Glencore Xstrata (GLEN.L) have both supplied alumina to Iralco in the past as part of barter deals in exchange for aluminium, but both halted supplies over new EU sanctions.
NALCO company officials, including Chairman and MD Ansuman Das declined to comment on the tender award.
Iralco could not immediately be reached for comment.
A senior official at India’s mines ministry, under which state-owned NALCO operates, said the government was not looking into the issue but could investigate if required.
“In general, we do not have anything against trade ties with Iran,” the official said.
The sale was for 30,000 tonnes of alumina to Iralco and shipments were due to start in August, the sources said.
The deal comes as India tries to boost exports to Iran to balance a trade deficit with the country due to India’s oil imports. India is seeking to boost overall exports worldwide to shore up its currency, which has sunk to record lows.
“(The) Indian government is encouraging exports to Iran. There is nothing wrong in NALCO exporting alumina to that country,” a senior company official who declined to be identified due to corporate policy told Reuters.
NALCO said last week it planned to raise its alumina exports by 40 percent to 1.4 million tonnes this fiscal year to help India increase dollar inflows as global investors dump emerging market currencies anticipating the gradual end to U.S. stimulus.
Additional reporting and writing by Melanie Burton in SINGAPORE and Krishna Das in NEW DELHI; Editing by Simon Webb and Ed Davies