A high-level delegation of state-owned NMDC will meet Nippon and Posco officials during its week-long trip to Japan and South Korea to seek a hike in the price of iron ore by over two-fold from last year's rates.
"We will meet Nippon Steel officials in Japan and Posco officials in South Korea. We expect to clinch a 90-100 per cent hike in prices to supply our iron ore to them over the last contracted rates," NMDC Chairman Rana Som, who will lead the delegation, told PTI.
Som said the company would like to follow the new global practice and enter into 'quarterly' supply agreements, but nothing has been finalised yet.
"We are going to negotiate and finalise the new supply contract," he added.
The NMDC team left for Japan on May 22. From there, the delegation will head to South Korea.
The company had last year entered into a 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 spot iron ore prices now hovering at around $160 a tonne, a 90 per cent increase from the previous year's level, the company aims to seal a new deal at almost double the price of last year's supply contract.
The miner exports about 3 million tonnes of its produce to these two countries annually. It mined about 24 million tonnes of iron ore in the last fiscal.
The prices at which NMDC supplies iron ore to 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 the rates for iron ore supply for the April-June period compared to last fiscal's contracted prices, it may seek quarterly pacts with Indian firms at the benchmark price.
Som said if the company gets the desired hike in prices of its iron ore, NMDC's margins would improve. The country's largest iron ore producer posted a 4.34 per cent growth in net profit to Rs 1,065.59 crore in the March quarter, up from Rs 1,021.19 crore in the the year-ago period.
On the other hand, domestic steel producers have been voicing their concerns to the Steel Ministry about the increase in input costs, due to the surge in iron ore prices. Another vital input in steel-making, coking coal rates have also increased by about 50 per cent to around $200 a tonne.
