The Hindu Business Line : Indian suppliers await decision on iron ore pricing

The two sides
China, emerging one of the leading buyers, wants to play a lead role in settling the price.
Brazilians have asked for a price increase of 24 per cent, while buyers view it as too high a hike coming on top of a 71.5 per cent increase last year.

New Delhi , May 6

Indian iron ore suppliers to the global markets are keeping their fingers crossed, awaiting the outcome of the price hike negotiations between the world's single largest buyer China, and the single biggest seller Brazil. Industry sources dealing with export of iron ore told Business Line here that this year round, there has been `a prolonged discussion' on iron ore price negotiations in different parts of the world with no firm conclusions yet in sight. For once, they said, China is keen on taking a lead in the price negotiations for the first time because all along the past it was Europe and Japan which took the lead in deciding the price. But China is now emerging as one of the leading buyers and wants to play a lead role in settling the price.

While the global supply situation does not reflect very substantial increase in prices, the sources said sellers opine that there is a pull in demand and availability is short for them to wrest some reasonable increase in price for iron ore — what is reasonable and what is substantial is something not yet put on the table.

The sources said Brazilians have asked for a price increase of 24 per cent, while buyers view it as too high a hike coming on top of a 71.5 per cent increase last year. So, after May 9 or 10, 2006, when negotiations begin for price band for iron ore sale, the deal would, for the first time, be between China and Brazil and not between Japan and Brazil or Australia and Japan or Brazil and Europe as it used to be in the past, the sources said.

Japan stays away, Australia watching

The sources said Japan has withdrawn from the negotiations as buyer this time because they were told last year by the same Chinese side that when they gave 71.5 per cent increase last year `Japan gave too much.' Hence the Japanese side told China "we withdraw this year and you decide whatever the number you find reasonable" and a bit of game is going on in terms of clinching the price hike for iron ore sale this year, the sources noted.

With Brazil having already put the number on the table, the other big supplier Australia does not want to talk any number because if it gives a number lower than that indicated by Brazil, this would destabilise the negotiations. Hence the Australians are sitting on the fence waiting and watching the developments to get included. In effect, the Australians too have withdrawn from the negotiations, leaving the Brazilians with the higher number to negotiate with China.

For India, which exports iron ore through MMTC, the bulk trader in metal and minerals, till the negotiations between Brazil and China get settled, there is uncertainty, the sources said, adding that the major countries currentlyimporting iron ore from India include China, Japan, South Korea, Taiwan, Pakistan and European countries.

Exports of iron ore from India this year will fetch higher receipts even as some steel producers have pleaded for placing curbs on export of iron ore in the light of the mining rights given to the South Korean steel major Posco when it plans to put up a greenfield steel plant in Orissa.

Policy norms

Even the Dang Committee, which submitted its report to the Ministry of Steel in August last, did not have export of iron ore as part of its terms of reference. The sources said that the present foreign trade policy prescribed canalisation through MMTC of export of iron ore of +64 per cent Fe content from all sectors, except ore of Goan and Redi origin. Quantitative ceilings on export of high-grade iron ore from Bailadila sector have also been clamped to take on board the felt concerns of domestic steel companies.