Steelmakers of the southern state have welcomed the snip in the floor price, but said there was a need for further correction in ore prices to bring it at par with prices in Chhattisgarh and Odisha
After a long-drawn battle with Karnataka’s steel producers, the state-owned National Mineral Development Corporation (NMDC) Ltd has cut the base price of iron ore by Rs 300 per tonne.
Steelmakers of the southern state have welcomed the snip in the floor price, but said there was a need for further correction in ore prices to bring it at par with prices in Chhattisgarh and Odisha.
T R K Rao, director (commercial), NMDC, has confirmed the price-slash in an email response to queries sent by DNA Money.
“Yes, NMDC in Karnataka has reduced the base price of iron ore by Rs 300 per tonne,” he wrote back.
R K Goyal, president, Karnataka Iron & Steel Manufacturers’ Association (Kisma) and managing director of Kalyani Steel, said local steel producers have been informed about the slash in the ore prices, which will reflect in the e-auction document expected to be out soon.
“We have been told the base price will be cut by Rs 300 per tonne. This will be reflected in the prices that will be mentioned in e-auction documents to be held shortly,” he said.
For instance, iron ore with 63% Fe content was sold at base price of Rs 2,700 per tonne for fines and Rs 3,000 per tonne for lumps in the last auction. Both will be lowered by Rs 300 a tonne in the next auction. The reduction in the floor price of ore will be across all grades.
M V S Seshagiri Rao, CFO and joint managing director, JSW Steel, lauded the NMDC move but said it did not close the gap between prices of same grade iron ore of Karnataka and Odisha.
“It’s a welcome step. Karnataka steel industry has been looking for iron ore prices being brought in line with Odisha. In Karnataka, a 59.5% grade iron ore loaded into wagon, including the taxes/royalties, is priced at Rs 3,306 per tonne. The same grade of iron ore is available in Odisha at around Rs 900 per tonne. That is the kind of difference in prices while the reduction is only Rs 300 per tonne. So, we still have a long way to go,” he said.
There has been a stand-off between the steel producers and miners over pricing of ore for some time now.
The former has accused the latter of taking advantage of shortage and charging a premium on the commodity.
Miners, on the other hand, have alleged that with steel producers lifting iron ore from other states, they were finding it difficult to find buyers for their ore stock at auctions in Karnataka.
R K Goyal also echoed similar sentiment as JSW’s Rao.
“It is still much higher compared to the same grade iron ore in other states. It’s (base price cut) not bad but it’s not substantial either. There is still a difference of over Rs 1,000 per tonne. We request the miners to reduce it further and bring it at par with Chhattisgarh and Odisha,” he said.
According to him, the price-cut would do little to improve margins as steel players have lately been dealing with rising coking coal prices. He said coking coal prices have shot up by around $50 per tonne in the last one month.
Goyal said Kalyani Steel was looking at hiking steel prices in October when the company’s contract with original OEMs) comes up for renewal. “Coke (coking coal) prices are going up so a price-cut will not improve our margins. It will only provide some relief in terms of cost,” he said.
SEEKING PARITY
- Steel producers say miners need to drop the price more to bring it on par with Odisha and Chhattisgarh; claim there was still a gap of over Rs1,000 per tonne compared with other major steel producing states
- Rs 2,700 Base price of iron ore with 63% Fe content per tonne
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