The Hindu Business Line : `Iron ore freight cut may not lower steel prices'

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Mumbai Feb. 26 The reduction in iron ore freight rates by 6 per cent in the Railway Budget is unlikely to have any immediate impact on steel prices.

Steel makers are not likely to lower steel prices in the wake of the reduction in freight, as they feel that the increase in congestion charges to 21 per cent from 10 per cent would neutralise the benefits provided by the cut in freight charges.

Ruling out any cut in steel prices, Mr Ankit Miglani, Director, Uttam Galva Steel, said "The Railway Budget has reduced freight rates on iron ore by 6 per cent. IN addtion to that they have modified the congestion charges to make domestic purchase of iron ore more viable. Overall this will reduce the cost of inputs."

Steel manufacturers require three tonnes of raw materials for producing a tonne of steel. Any increase in transportation of raw materials, which are mostly sourced from different parts of the country, will have a cascading impact on end product prices. India's steel production stood at 30.68 million tonnes up to November 2006, against 44.54 million tonnes in the whole of 2005-06.

Steel manufacturers also felt let down by the Budget not extending the empty flow discount to coal, coke and iron ore. The Railways has offered a discount up to 40 per cent on incremental loading of bagged consignments in open wagons in empty flow direction. Mr Seshagiri Rao, Director, Finance, JSW Steel Ltd said: "the increase in port congestion charges from 10 per cent to 21 per cent has more than nullified the benefits extended by freight rate reduction. Moreover, there are no clear guidelines for setting up public-private rail corridors. Also there is no mention of setting up private corridors in south, where we have our plant." The company owns a steel plant spread over 3,000 acres in mineral ore-rich Hospet (Karnataka).

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