Despite global iron ore prices remaining stable in the last few weeks, NMDC may hike prices of its ore for the July-September quarter.
The iron ore miner is likely to increase its prices by 8-10 per cent for lumps and fines, sources said. It is likely to take a call on the July-September price list in the next few days.
NMDC has more room now to insulate its prices from global trends, as its new pricing mechanism is based on domestic demand-supply dynamics instead of the earlier export parity formula.
It had injected a similar hike for the last quarter, with the increase ranging from Rs 250 to Rs 400 a tonne. Higher grade iron ore lumps are currently priced at about Rs 5,400 a tonne, while fines have a price tag of about Rs 2,800.
Production
Domestic ore production has not been as high as expected due to the continuing delay in opening of new smaller mines in Karnataka and production at existing mines affected by the monsoon.
Besides, there were expectations that the ban on iron ore mining in Karnataka will be partially lifted last month.
Some 16-20 smaller mines were scheduled to be opened in Karnataka, but these have been delayed due to various reasons, chiefly on the clearances issue.
Supply position
Opening of these mines could have significantly improved the domestic supply position, giving reason for miners to ease prices, industry players point out.
NMDC, which accounts for nearly 40 per cent of India’s iron ore production, supplies the material to steel makers such as SAIL, Essar Steel, JSW and Rashtriya Ispat Nigam Ltd. Steel makers, which have been increasing their prices since January, will have to take a call on whether to pass on the ore price hike to their customers.
NMDC’s price hike decision will have to be taken by Mr C.S. Verma, SAIL Chairman, as he holds additional charge as Chairman and Managing Director of NMDC.
Keywords: iron ore price, NMDC, hike prices, Domestic ore production, supply position
Comments:
NMDC shld address the key issues in shifting from export parity to domestic demand based price. Earlier export parity price was flawed only as they used to deduct the export duty (currently 30% of FOB price) and the differential export rly frt (Rs.2000 avg.), to fix domestic prices although such costs are not incurred domestically. Thus against ore landed price of Rs.7500 per ton which Chinese and global mills buy at, domestic mills got ore at Rs.2400-3500!! Indian mills were heavily subsidized by NMDC/Indian Govt. at the nation's cost. If NMDC now prices solely on domestic demand, Indian mills will quote low prices in a cartel. Thus NMDC should hold domestic tenders and base their prices on domestic tenders or export prices (without deducting export specific costs) whichever is higher. They should also sell ore domestically or for export for better earnings. They r floating a IPO, shareholders come first. Sail Chairman cannot fix price as CMD NMDC as it is conflict of interest.
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