Iron ore prices seen stabilising

Calling the double whammy of increasing price of iron ore and falling price of steel an aberration, Indian steel companies are expecting the market to make the correction.

There has been concern with the price of iron ore, the integral raw material for steel, increasing by more than 70 per cent.

On the other hand steel prices, after reaching record levels, have stabilised in the last six months. It was earlier reported that there was Rs 1,000 fall in steel prices about a fortnight ago.

"Most of the players buy iron-ore on long-term contract. Spot market accounts only about 3 per cent of the total supply. So the impact is not much," said an industry source. "We will have to see what is the long term variation. Anyway, can't expect the buyer to lose money."

In terms of other raw materials, for instance coal, spot price correction has taken place, say industry players.

"Iron-ore prices had fallen earlier and now the correction is taking place. Producers have already finalised the price for coal for the fiscal and have ruled out any hike. Similarly, there is a resistance to increase iron-ore's contract price," said a source.

At the same time, companies don't rule out an increase in steel price if the rise in input cost persists. Pressure on the prices has again put the spotlight on the high profile MoUs signed in Orissa, Chattisgarh and Jharkhand to mine iron-ore deposits. Have the states promised more than they have?

"It's premature to say anything untill the MoUs materialise, which itself is a question mark," said an industry insider.

Participants at the Asian Steel Conference last week had felt that India has rich deposits of iron-ore and there is nothing to worry."