Steel producers may be forced to raise rates

NMDC is likely to hike prices of iron ore for January, as global ore prices rallied strongly this month in the wake of a demand revival from China.

The iron ore miner, which currently fixes ore prices on a monthly basis, will be finalising next month’s prices when its board meets on January 2, sources told Business Line.

Global iron ore prices hit an eight-month high this week, after being under pressure the last few months.

The possible price hike will add to the pressure on the Indian steel industry, which is battling costlier inputs and tame domestic demand.

In October, NMDC had cut ore prices by 2-11 per cent and did not opt for a revision this month, providing some relief to steel producers.

For the July-September quarter, the company had increased prices by 8-13 per cent and about Rs 250 to Rs 400 a tonne for the previous quarter, despite global prices remaining more or less stable for the last three months.

Global trends

Currently, the price of iron ore lumps is around Rs 5,400 a tonne while that of fines with less than 60 per cent content is Rs 2,600 a tonne. Globally, ore prices hit a three-year low in early September.

They had fallen from an average of about $200 in May 2011 to about $150 this May and below $100 a tonne in early September.

But since then, as Chinese steelmakers began to refill inventories, ore prices have gone up almost 50 per cent to hover around $140 a tonne.

Based on these global trends, NMDC is likely to revise its prices upward for next month, which the steel-makers may, in turn, have to pass on to their consumers.

KPMG report

International consultant KPMG, which has been hired by NMDC to recommend a new pricing mechanism, is expected to submit its report by January end, the sources said.

KPMG, which had been selected from among six bidders, has been asked to study the different models adopted by other ore-producing countries.

(This article was published on December 30, 2012)
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