State-run iron ore miner NMDC may announce a Rs 300-400 per tonne increase in the prices of the key steel-making raw material in the third week of this month when its Board meets to take a final call.
Sources in the country's largest iron ore producer said the price rise is almost a given now since the raw material is in short supply domestically and costlier in China.
"The price hike in China to $150 per tonne now from $130 per tonne in the recent past provides NMDC the necessary cushion to effect a hike, which is likely for both for lumps and fines - two varieties of iron ore," sources said.
A ban on mining in Karnataka's Bellary region since July last year and closure of some mines in Goa have impacted iron ore production, resulting in inadequate supply for most of the domestic steel mills, which do not have a captive source.
Bellary used to contribute 80% of Karnataka's production of around 16 million tonnes.
NMDC's acting Chairman N K Nanda declined to comment on the possible hike in the prices, saying the matter would be discussed at the next Board meeting of the company, slated for the third week of this month.
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"It is not proper to comment on the price hike now. Wait for another two weeks. Our Board is going to meet in the third week of this month. Board will decide on this. So far, there has been no increase during the month," Nanda said.
The proposed price hike may not push the steel prices up further since almost all leading producers of the metal have effected a price hike from the beginning of the current month, factoring in cost escalation.
NMDC has already communicated the provisional price of iron ore for the April-June quarter to steel firms. It had lowered iron ore price by up to Rs 160 per tonne for lumps and Rs 600 for fines in the fourth quarter of the last fiscal, after hiking the price in the October-December quarter of 2011-12.
The price of lumps, which Indian steel mills mostly use, is between Rs 4,900 - Rs 6,000 per tonne now. Fines are being traded between Rs 2,200 - 3,000 per tonne.
Lumps contribute 40% to NMDC's sales while the rest is from fines. Essar Steel, JSW Steel and RINL are among NMDC's biggest customers.