Economy

Steel cos blame high cost of iron ore for price hike

Suresh P Iyengar Mumbai | Updated on December 29, 2020

NMDC raises iron ore lump prices to ₹4,610 a tonne from ₹1,960 a tonne in last 6 months; every ₹1,000 rise in ore prices pushes up steel output cost by about ₹2,000 a tonne

Steel companies have urged the government to temporarily ban iron ore export to improve domestic supply and bring down prices.

Steel producers have come under heavy criticism for hiking prices consistently and putting pressure on infrastructure projects.

In a letter to PK Mishra, Principal Secretary to the Prime Minister, the Indian Steel Association said a temporary ban on exports of high-grade fines and lumps for six months or till the situation stabilises, will increase domestic supply.

Also read: NMDC’s Donimalai iron ore mine lease issue resolved

The Central government should direct State government miners such as Odisha Mineral Company and the Industrial Development Corporation of Odisha to prioritise supply to domestic end-users over exports. Daily tonnage limits can be set for exports and diverting the major quantity to domestic steel manufacturers, said Bhaskar Chatterjee, Secretary General, ISA.

Further, he said, OMC, OMDC and IDCOL should restrict its e-auction of iron ore only for end-users, such as pellet or steel manufacturers in India.

The 30 per cent fall in iron ore production between April and October to 92 million tonnes has led to a spike in prices.

NMDC has increased the prices of iron ore lumps from ₹1,960 a tonne to ₹4,610 in the last six months. Every ₹1,000 increase in iron ore prices pushes up the cost of steel production by about ₹2,000 a tonne.

Production in Odisha, which contributes over 50 per cent of the country’s annual iron ore output, plunged 60 per cent in the first five months of the fiscal year to 15 mt against 35 mt logged in the same period last year.

The shortage in Odisha was mainly due to expiry of iron ore leases and evacuation issues. There is a persistent supply imbalance in Odisha due to 14 of the 19 newly auctioned mines failing to start operations. Production at the five captive operating mines was at 1.5 mt during April to July, against the target production of 17.4 mt.

The output of iron ore in Chhattisgarh was down 9 per cent to 12 mt in the first half of this fiscal.

Apart from lower production, evacuation of iron ore was an issue, as road and rail facilities were used for fulfilling export obligations rather than meeting domestic demand.

Also read: Why you should accumulate the stock of NMDC

Iron ore exports have surged 70.3 per cent to 29.2 mt in the first half of the current fiscal, compared to the same period last year.

Chatterjee said about 92 per cent of the exports were directed to China during the period when India and China had a violent border stand-off in eastern Ladakh and when Chinese products were subject to a barrage of restrictions, including the ban on mobile apps.

Iron ore exports at 27 mt shipped to China during April to August was the highest since 2011-12.

Published on December 29, 2020

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