Despite uncertainty in the steel market due to poor demand for long products, iron ore prices have moved up 11 per cent in a month.The prices gained on hopes of revival in construction projects that were hit because of last year’s global economic recession.
The benchmark iron ore price, including freight, ex-Chinese ports, firmed up to $91 a tonne this week as against $82 a tonne a month ago. However, lower grade ore with 58 per cent iron content remained flat at $75 a tonne.
Stakeholders of the steel industry, meanwhile, are unhappy, as demand for long products needs to catch up, while flat products are doing reasonably well on rising consumption of white goods and other similar products where steel flat is used abundantly.
“The steel industry is in a complete turmoil, with so much of uncertainties. Iron ore prices are not fixed, neither for the current year nor are there any indications for the next year. China is yet to take any clear stance on iron ore prices, which BHP, Rio and Vale are vying for. Hence, there is no clarity on steel business today,” said R K Sharma, secretary general, Federation of Indian Mineral Industries.
According to industry sources, China is gradually increasing mine acquisitions in under-developed African countries, including Zambia and Angola, where an abundance of proved natural resources await exploration and local governments invite overseas participations. China, the world’s largest steel producer, is targeting 600 million tonnes (MT) of output this year as against 500 MT last year.
India contributes about 100 mt of China’s total iron ore consumption of about 700 MT. As local mills are not geared up to use fines, India will continue to meet China’s ore deficit on a spot basis only, said Vimal Kumar Somani, Director, Topworth Group of Companies, a Raipur-based sponge iron producer.
The steel industry has been a victim of uncoordinated central and state government policies, with the Centre having levied market-linked royalty on iron ore early this financial year. Miners are expected to pay at least 10 times the previous static royalty of Rs 27 a tonne.
According to Haresh Melwani, CEO of H L Nathurmal & Co, a Goa-based iron ore miner and exporter, “The state is contemplating a forest cess for iron ore miners, which is likely to add pressure on margins of mining companies or raise prices of steel-making raw materials. Also, the Karnataka government is working on Rs 300 a tonne of transport cess for supply of iron ore.”
“All this will aggravate problems for steel producers and multiply uncertainties in the steel industry. The overseas iron ore buyers want a consistent policy which is lacking here in India,” he added.
Instead of focusing on revenue only, the government must focus on infrastructure, as India, especially Goa, is now capable of handling ships of a maximum of only 30,000 tonnes lifting capacity, as compared to 400,000-500,000 tonnes in Australia and Brazil, where China has been importing raw materials from, Melwani added.
Meanwhile, sponge iron producers have also raised prices by 7-8 per cent or Rs 600-800 a tonne to Rs 13,600 a tonne on rising raw material prices and inventory pick up by steel majors. Coal, a major ingredient for making sponge iron, has also gone up by 15 per cent.
