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| Steel makers find raw material costs too high |
| Ishita Ayan Dutt / Kolkata Apr 14, 2009, 00:33 IST |
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JSL, the largest ferro alloy producer in India, has decided not to lift any ore from the Orissa Mining Corporation (OMC) this quarter, as it finds the prices too high.
Arvind Parekh, director for strategy and business development, JSL (formerly Jindal Stainless), said the global prices were much lower than those of OMC, a state-owned public sector undertaking. At such high prices, the company would have to review the finished product prices in the next 15-20 days.
OMC had cut prices for the April-June quarter by 5 per cent, to Rs 3,588-4,956 a tonne.
| TALKING TOUGH |
| * JSL has decided not to lift any ore from the Orissa Mining Corporation this quarter |
| * In the global market, lumpy ore, the higher grade ore, costs $130 (around Rs 6,500) a tonne |
| * The lower grade, friable ore, is sold at Rs 4,956 by OMC, says JSL |
In the international market, lumpy ore, the higher grade of the raw material, is available for $130 (around Rs 6,500) a tonne. Friable ore, a lower grade, costs only $110-115 a tonne.
Parekh argues: “We primarily buy friable ore from OMC. With such low international rates, OMC should reduce prices to Rs 3,000-3,500 a tonne.”
The prices of the finished product ferrochrome have come down in the same period from Rs 44,000-42,000 a tonne to Rs 36,000-37,000 a tonne.
OMC also used to give cash discounts and deduction for moisture, which have also been withdrawn. “We will not lift any material till OMC reduces prices or restores the discounts,” said Parekh.
JSL is OMC’s biggest customer in volume terms as it has the largest ferro alloy capacity of 150,000 tonnes.
Some carbon steel producers also feel that the raw material prices are too high. JSW Steel is in the process of negotiating its coking coal contract for the year and the company finds the $129-a-tonne price, which the Japanese steel mills agreed to pay, unsustainable.
Jayant Acharya, president (sales and marketing),
JSW Steel, said that internationally, prices would have to move up from $129 a tonne for coking coal.
“For the present level of finished product prices, $129 a tonne is not sustainable,” he said.
At present, hot rolled coil (HRC) market price stood at Rs 31,000-32,000 a tonne. After commissioning its expanded capacity recently, JSW would have to import 7 million tonnes of coking coal this year, compared to 4 million tonnes last year.
“We are still servicing high-priced coal,” Acharya pointed out.
NMDC, a public sector miner, which supplies iron ore to most of the companies without captive mines, is yet to decide on the new prices. NMDC reduced prices in November by around 27 per cent.
Industry sources said,
“We don’t know how much NMDC will reduce prices now as they reduced prices in November.”
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