Ignored by the Budget, steel companies are redying to strike back with hefty price hikes unless the government lowers iron ore prices.
Want rollback of proposed hike in ore prices
KOLKATA: Ignored by the Budget, steel companies are redying to strike back with hefty price hikes unless the government lowers iron ore prices.
Feeling let down by the Budget for not slapping higher export tax on iron ore (a hike in duty would have led to an increase in domestic availability and reined in ore prices) and keeping import duty on coke unchanged at 7.5%, steel companies want the government to hold back NMDC from hiking iron ore prices by 50% for deliveries after April.
Else, steel makers will be forced to increase prices by as much as Rs 3,000-4,000 per tonne.
According to an estimate, input cost for steel plants without captive mines has gone up by Rs 8,000 per tonne since October 2007 and, of this, only Rs 3,000 has been absorbed through two price hikes in the last two months .
NMDC has already announced that it would increase ore price by 50%, saying this would be in line with global trends, where Japanese steel mills have agreed to a 65% hike in ore supplies from Australian mining majors. Turn to Page 26
Domestic steel companies are up in arms against this not only because of the quantum of the planned hike but also NMDC’s alleged reluctance in committing supplies through long term contracts and instead preferring to benchmark prices based on spot tenders. NMDC has already affected one dose of price hikes for April deliveries, with lump ore prices up by Rs 1,527 per tonne and fines by Rs 1,222 per tonne.
Some of NMDC’s main customers at home claim that the public sector mining company kept prices valid for short terms of three months so that ore prices could be revised based on the exorbitant tender prices quoted by merchant exporters of iron ore.
In a memorandum to Union ministry of steel, the industry has demanded immediate directive to public sector mining companies to enter into long-term contracts with domestic steel producers with pricing linked to a cost of mining plus a reasonable rate of return and with inbuilt annual escalation clause.
Officials said, while steel ministry was in favour of reining in domestic iron ore price, the ministry of mines was in no mood to comply, preferring to ride the global trend to bolster bottomlines of companies under its fold.
“Forget price rollback. Forget price stability. It is presumed that India’s competitiveness in steel production is availability of quality ore reserves. If the government cannot ensure this sole competitiveness, not only will growth be scuttled, demand-supply will be further skewed leading to increasing import dependency,” said a senior official of a steel company that sources raw material from NMDC.
During April-December 2007, steel demand was up 12.2% while production was up 6.6% resulting in a 67% rise in imports.
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