In a fresh representation made to NMDC, steel producers and sponge iron manufacturers have argued that the Rs 500 per tonne price hike of both grades of iron ore i.e. lumps and fines for January has raised input cost proportionately, which they are unable to pass on to user industries. Since the demand of raw material is directly proportional to steel consumption which faces stiff competition from imports, iron ore user industries have feared steep losses in running business with such a high raw material prices.
The demand comes in the wake of a fear of further price hike in iron ore by NMDC for February after sharp hike in January.
“We are in constant touch with the NMDC officials for a price cut. For January, we saw a steep price rise which made survival of many small- and medium-size units difficult. We hope, NMDC cuts iron ore prices for February,” said R K Goyal, Managing Director, Kalyani Steel Ltd and Vice President of Karnataka Iron Steel Manufacturers Association (KISMA).
With the January price increase of Rs 500 per across all varieties, lump ore was quoted at Rs 3,100 a tonne and fines at Rs 2,760 a tonne, witnessing an increase of 19 per cent and 22 per cent respectively.
Following this price increase, Sajjan Jindal, chairman of the JSW Group, had said in a Twitter post: “Recent increase in iron ore price by NMDC and Odisha's private miners are forcing steel companies to pass on the increased cost of production. The increased cost of other raw materials like coal, refractory and electrodes are further fuelling this.” Steel mills had raised their products prices by 6 per cent for January 2017.
Industry sources said that international iron ore prices fell by 6 per cent or $4.48 a tonne while NMDC has increased iron ore prices by 36 per cent or Rs 880 a tonne on spot basis in January. This increase, however, works out to 42 per cent of price differential between the prices of domestic and imported iron ore. Hence there is scope to cut prices.
“Before the January price increase, we were selling pellets at Rs 5,000 a tonne. But, the increase in iron ore price has made our cost of pellet production at Rs 6900 a tonne along with a conversion cost of around Rs 900 a tonne. The same pellet, however, we would not be able to sell beyond Rs 6800 a tonne,” said MV Subba Rao, Chairman, KIOCL Ltd.
The preferential allocation to NMDC was mandated to ensure availability of iron ore to domestic market for uninterrupted production of steel within the country.