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Monday, May 17, 2004

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Fall in iron ore prices likely

Ambarish Mukherjee

New Delhi , May 16

IRON ore prices in the domestic market may head for lower levels in the coming days following a slump in international demand and prices following much lower Chinese demand for the past few weeks.

This, however, is unlikely to bring down the prices of steel in the domestic market as the steel companies, which had frozen the prices till elections following Government intervention, are likely to effect a price hike within the next few days.

Already, country's largest steel producer Steel Authority of India Ltd (SAIL) has increased the prices of its long product by an average of around Rs 4,000 taking it to Rs 19,000 a tonne from Rs 15,000 a tonne effective from Thursday, the day election results came out. The other companies are expected to follow suit, industry sources told Business Line and added that while long products prices will go up further, flat product prices may stabilise at current levels.

However, sources said that fall in iron ore prices are unlikely to bring down steel prices as the companies have absorbed a part of increase in iron ore prices over the past one year, but admitted that lower iron ore prices may help reduce steel production costs further in the coming months.

According to available data, Indian companies were exporting iron ore fines at prices in the range of $60-65 per tonne in February. "But now it is difficult to export even at $40 a tonne. Now the situation is such that people are getting $38-40 a tonne FOB," industry sources said.

On the other hand the domestic price is around Rs 1,900 per tonne. Officials in steel companies pointed out that though the domestic price and international prices are more or less at the same level, the fall in domestic price may be to a lesser extent compared to fall in export prices.

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