Iran plans to invest around 8.5 billion euros ($11.4 billion) in its aluminium industry as part of plans to nearly quadruple production by 2025, an official at mining group Imidro said on Thursday, Reuters reported.
Iran is the 20th largest producer of aluminium in the world, according to the Iranian Mines and Mining Industries Development and Renovation Organisation (Imidro), and needs the extra supplies to meet demand which is growing by 10 percent a year.
Aluminium is a lightweight metal used widely in transport, packaging and construction. It can also be used to make tubes for uranium enrichment gas centrifuges.
Iran's economy has been hobbled by western sanctions aimed at pressuring Tehran to stop efforts to enrich uranium to levels that could be used in weapons.
Iran produced 338,000 tonnes of aluminium last year and is aiming for 770,000 tonnes in 2016 and 1.5 million tonnes by 2025, Panthea Geramishoar, senior expert in Imidro's non-ferrous department said at a Metal Bulletin conference in Geneva.
Geramishoar did not give a timeframe for the eight projects involved in the program, but added that bidding was underway for one plant(Persian Gulf Alumina) and financing was being arranged for two others(Salco, Kalco).
Iran could struggle to increase production so quickly given it is heavily dependent on importing the raw ore bauxite or the refined ore alumina at a high cost. Alumina costs have been pushed up by the impact of sanctions.
According to Press TV, an Iranian news site, Iran's aluminium output hit 119,560 tonnes in the first four months of the current Iranian calendar year, which began on March 21.
At this rate, the country would produce 358,680 tonnes for 2013, just 6 percent above last year's output level.
Geramishoar said higher prices for alumina imports have already contributed to a rise in the cost of aluminium production to over $2,000 a tonne.
LME aluminium was trading at $1,827.75 per tonne at 1129 GMT.
"The current conditions are obviously not favorable...as the raw material we buy is mostly on a barter basis. In more optimum conditions, the costs could be decreased to around $1,700 a tonne or even less," she said, adding that sanctions were one of the factors driving up raw material costs.
The United States tightened sanctions on raw and semi-processed materials, such as alumina, to Iran at the start of July this year as part of a campaign to target Iran's nuclear program. Tehran says that its atomic work is peaceful.
Western sanctions cut Iran's petroleum revenue by about $26 billion in 2012 from a total of $95 billion in 2011. Iran also had to contend with soaring inflation, and a devaluation of its currency, the rial.
Iran has increased purchases of alumina from China and India in the past two months to help replace former contracts impacted by sanctions.
The Iran Aluminium Company (Iralco), which western sources believe has links to the Iran Centrifuge Technology Company (TESA), was recently awarded a tender to buy alumina from India's National Aluminium Company (Nalco).
The United States can dissuade countries from trading in sanctioned goods with Iran by threatening to cut their banks off from the U.S. financial system. It can also blacklist any company, local or foreign, that deals in sanctioned goods with Iran.