The country's largest iron ore producer, NMDC, today said it will seek up to a 100 per cent jump in prices for supply of iron ore to Japanese and South Korean steel mills for the current quarter over the previous contractual rates.
"We will seek a 90-100 per cent jump in the prices at which we supply iron ore to Japanese and South Korean customers. As of now, we are looking to enter into supply contracts for the first quarter only," NMDC Chairman Rana Som told PTI.
The company had last year entered into pact to supply iron ore lumps to these mills at around $71 a tonne and iron fines at $61 a tonne for the 2009-10 financial year.
With the sharp increase in the spot iron ore prices, the company aims to seal a deal at almost double the last year's contracted rates. A team of top officials of NMDC are expected to leave for the two countries on Saturday to finalise the contracts.
Som also said the company will follow the prevalent global practice and look to enter into quarterly supply contracts with these global mills. The miner exports about 3 million tonnes of its produce to these two countries annually. It mines about 28 million tonnes of iron ore per annum.
The supply pact between NMDC and Japanese and South Korean mills acts as benchmark for similar arrangements between the miner and domestic steel firms like Essar Steel and JSW Steel.
If the company succeeds in getting double rates for its iron ore as compared to last fiscal's contracted prices, it may seek quarterly pacts with Indian firms at the benchmark price.
However, Steel Secretary Atul Chaturvedi said that global and domestic "operational and business realities" differ and thus he would not support quarterly supply from NMDC to Indian steel-makers.
"India is different from Japan and South Korea and other countries. The business model of big and small domestic steel makers is different from that of any global steel producer. I think NMDC should continue annual contracts with domestic firms," Chaturvedi told PTI.
Domestic steel producers have been voicing their concern to the Steel Ministry against the increase in input costs due to a surge of as much as 90 per cent in iron ore prices to about $160 a tonne as against last year's level. Coking coal prices have also increased by about 50 per cent to around $200 a tonne.
The steel firms have been seeking successive hikes in iron ore export duty to increase domestic availability and rein in spiralling prices.