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Contrary to its projections, National Mineral Development Corporation (NMDC) may reduce ore prices for domestic steel makers for the April to June 2011 quarter, in tandem with the sharp fall in spot prices globally in the aftermath of the Japan quake.
India's largest iron ore producer, NMDC, is yet to finalise rates for the coming quarter, and is waiting for global iron ore majors to come out with their prices in the non-spot market, sources told Business Line .
Even till last month, NMDC was looking at hiking ore prices, as global prices were on the rise, especially after the natural calamity that struck Australia. The company was looking at a 10-15 per cent hike from its current quarter price of between $140 and $150 a tonne.
The sources said NMDC is now re-doing the math, with ore prices in the spot markets drastically falling after the quake in Japan and on China holding back its buying plans.
The Japanese steel industry, which consumes some 130 million tonnes of iron ore annually, has been disrupted by the massive earthquake and tsunami.
Reports from Japan indicate that about 15 million tonnes of annualised steel production capacity could have been affected by the calamity.
Japan's steel production was estimated at about 110 million tonnes last year.
NMDC's quarterly prices are 30 to 40 per cent higher than the spot prices.
Even while the mid-February spot prices peaked at about $200 a tonne, NMDC's prices for the January-March 2011 quarter had already been fixed at about $140 a tonne. This was after a hike of about 6-8 per cent from the October-December quarter.
According to global reports, spot prices for iron ore fell to $170 a tonne earlier this week, after the mid-February peak of $200 a tonne.
Prices are softening also because buyers prefer to wait on expectations that weaker Japanese demand may improve supplies and thereby further push down prices.
Analysts said that ore prices will move up when Japan sets its course on re-construction, which will see increased steel production and concomitantly higher ore consumption.
In fact, the Government is in the process of working out an ore export policy, taking in factors such as higher railway freight for ore export cargo, which is three times the freight rate for domestic cargo. A major chunk of NMDC's ore exports from its Bailadila mines go to Japan.
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