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Iron ore prices have almost doubled at E-auctions in Karnataka as one mine after another started offering much higher base prices leading to the impression that they have come together to keep prices of this scarce steel raw material very high and optimize their returns. The new mines started over the last couple of months and selected mining firms in Category B have jacked up prices significantly.
The base prices of 61 per cent Fe iron ore fines have more mthan doubled to Rs 5,000 per tonne as against an average of Rs 2,250-2,475 per tonne charged by others. Even NMDC prices are in the range of Rs 2,000-2,200 per tonne.
Last week, a large private sector mining company with its leases in Category B, fixed a base price of Rs 5,000 per tonne in E-auctions.
However, there were no takers for its ore, sources close to E-auction process told Business Standard. However, another firm in the category with a little lower price tag could find buyers.
The move to increase prices by these firms has given a sense of cartelisation among the miners.
Denying any price cartelisation, a prominent miner, who did not want to be named, said, "There is no cartelisation in Karnataka, because not all miners are charging high prices. I agree that a few miners have quoted unreasonable prices at E-auctions. However base price fixed by these mines are different and hence it cannot be called as a cartel."
The steep rise in iron ore prices has significantly increased the cost of operation for steel makers in Karnataka.
"Some of the mining lessees have formed a cartel and started increasing the base prices to the tune of 70-80 per cent over and above the NMDC prices in the relevant grade. This arbitrary way of putting abnormal high base prices are resulting in huge profiteering for the lessees," said Vinod Nowal, President, Karnataka Iron and Steel Manufacturers Association (KISMA).
Members of KISMA met the chief secretary and mines secretary of Karnataka last week and demanded an immediate approval for other mining firms waiting for several statutory clearances to restart mining, so that the supply of ore could be increased.
As the demand and supply mismatch is set to continue for some more months, the steel makers are actively considering an option of filing an affidavit in the Supreme Court with a plea for setting up of a price regulator immediately to monitor sharp movement of iron ore prices in E-auctions. They are also planning to file an application to Competition Commission of India (CCI) on the mine owners forming a
cartel.
"What is disturbing us is the price fixing pattern followed by the miners. The prices of iron ore in the international market have come down from $147 per tonne to $123 per tonne and the rupee is stable.
Prices in Odisha are flat and the NMDC prices are around Rs 2,200 per tonne all over the country. Only in Karnataka the miners have increased their base prices up to Rs 5,000," said Seshagiri Rao, joint
managing director, JSW Steel Ltd.
As a result of this price rise, the landed cost of iron ore at steel mills works out to Rs 7,000 per tonne, which is unreasonable, he said.
Rao said mostly Category B mines have jacked up their prices. "In addition to very high base prices, steel mills in Karnataka have to pay royalty and forest development tax (FDT), which is usually borne by the miners in other parts of the country. There is a need for an urgent intervention by authorities to save the steel industry in Karnataka and half a million jobs," Rao said.
The steel industry in and around Karnataka requires 36 million tonnes of iron ore annually. The Supreme Court in April 2013 allowed 115 Category A and B mines to restart production. Till today, only 21 mines have resumed mining with the annual production capacity of 9.70 million tonnes. Another 9 million tonnes per annum comes from NMDC, leaving a shortfall of 12 million tonnes even meet the cap of 30 MTPA imposed by the Supreme Court.
