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Pressure mounts on NMDC to reduce iron ore prices

Pressure is mounting on iron ore major NMDC to reduce prices of the key steel-making raw material as all major private miners have cut prices in the range of Rs 800 to 1,000 per tonne in the last one month. 

NMDC, however, rolled over its December prices for the month of January despite the fact that international prices have been falling.

NMDC, the state-owned iron ore producer, which reviews its prices every month, is expected to announce its prices for the month of February early next week. The price fixation committee of the company’s board is scheduled to meet on Monday or Tuesday to take a decision on the possibility of reduction in prices, company sources said.

Meanwhile, iron ore prices crashed to five and a half year low at $ 63 per tonne (for 62% iron content) in the international market earlier this week.

A large number of NMDC’s buyers including steel makers like JSW Steel and Kalyani Steel among others, which source a majority of their requirement from NMDC in Karnataka, have made representation to the company’s board to reduce prices in line with the international trend and align with that of other private producers in the eastern sector.

Currently, NMDC sells iron ore fines at Rs 3,060 per tonne and lumps at Rs 4,200 per tonne, about 20-30% higher than the private players. Price of iron ore fines in Odisha have been falling for the last three months. The private miners have brought down their prices to Rs 2,530 per tonne from Rs 3,650 per tonne including royalty and taxes, a drop of 30 % since November 2014.

“Chinese steel makers are continuously dumping their steel in India. The demand for steel products is very low in the domestic market. With the current prices of NMDC, which are almost 40% higher than private miners, it is very difficult for us to survive,” Arun Maheshwari, Sr. Vice President – Commercial, JSW Steel said.

It is expected that miners in Odisha are likely to reduce prices by another Rs 500 per tonne from February 1, 2015.

“NMDC’s prices are higher even at a time when globally iron ore prices have crashed. They are not even ready to reduce prices in Karnataka and Chhattisgarh. They should go by the prevailing trends internationally,” Maheshwari said.

He said JSW Steel has already stopped procuring iron ore from the eastern sector for its plants in Dolvi and Salem for the last six months. “We are using only the imported ore for these plants and if NMDC continues its price trend, then we may have to increase our imports going forward,” he said.

The company buys around 7 million tonne annually from NMDC for its Vijayanagar steel plant in Karnataka.

However, analysts tracking the sector, feel that NMDC has a huge demand to fulfill and it might drop prices of iron ore lumps only to an extent of Rs 200 per tonne for the month of February.

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