Iron ore has fallen below the $100 per tonne mark or Rs 5,500 per tonne but NMDC in India is charging over Rs 6,000 per tonne based on its demand-supply model.
Over the last few months NMDC has raised iron ore prices twice with the latest one in August with 8-13% hike. Iron ore prices fell below $100 per tonne in the international market because of fears on the Chinese steel market outlook. China is world’s largest importer of iron ore. Nearly half of the world’s steel produced is in China. The country has scant iron ore resources and depends heavily on imports. Therefore, any fluctuation in Chinese steel market affects the iron ore prices globally.
NMDC, on the other hand, is India’s largest public sector iron ore miner and a mainstay for big steelmakers like JSW Steel and Essar Steel apart from the majority of small sponge iron makers.
Earlier NMDC used export parity price to fix its iron ore rates but gave it up for the demand-supply model. Therefore, it raised prices twice this year when internationally the trend is reversed.
In a letter dated August 30, the Sponge Iron Manufacturers Association (SIMA) asked the steel minister to intervene and ask NMDC to lower the iron ore rates. The association had asked the minister to “save the vital industry” from these arbitrary price hikes.
Also, Indian steelmakers were forced to cut prices by 2-3% this week because of the cheaper steel coming in from Korea and Japan. Higher iron ore rates and lower steel prices are a double whammy for the local steel industry.
