Iron ore rates seen up 10% on steel price hike

Rates of long-term iron ore supply contracts for the financial year 2006-07 are likely to go up 10 per cent after the recent hike in steel prices, Visambhar Saran, chairman of Visa Steel, said on Thursday.

Iron ore contracts for 2005-06 between mining companies and major steel companies were concluded at about $65 a tonne, up 72 per cent from 2004-05.

He said while steel companies are vying for a rollback in iron ore prices to the tune of 20 per cent, mining companies are expecting a hike of 20 per cent over the 2005-06 level.

"Unfortunately, in the last few days, steel prices have risen 10 per cent, and this might affect negotiations with mining companies and lead to a situation where iron ore contracts could be signed at 10 per cent higher prices, compared with the 2005-06 level," Saran said.

Saran was speaking on the sidelines of a press meet in connection with Visa Steel's initial public offer.

Most steel companies in India, except Tata Steel and Steel Authority of India, do not have captive iron ore mines to meet their full requirements and depend on purchases from mining companies. A rise in iron ore prices might affect the bottomline of some Indian steel companies as well.

India is one of the leading suppliers of iron ore to global steel companies, including those in China. Meanwhile, the third round of price negotiations between global iron ore suppliers and the Chinese steel companies failed to reach an agreement on Thursday, the online edition of People's Daily newspaper of China reported.

Shanghai Baoshan Iron and Steel Corp, representing China at the price negotiations, said the recent rise in steel prices was just a contemporary rebound after a sharp fall in 2005, according to the report.