NMDC to raise iron ore export prices by 17-20% from April

Rise essential to offset the increasing cost pressure on the company’s operations.

National Mineral Development Corporation (NMDC) may increase iron ore export prices by 17-20 per cent in the next financial year to cash in on higher global prices.

The public sector miner is also mulling a shift from annual to quarterly contracts for overseas customers.

“Given the pricing environment, NMDC is looking at a 17-20 per cent price rise from April 2011 to cash in on higher prices in the international market,” said a top NMDC official, requesting anonymity. He said the increase was essential to offset the rising cost pressure.

NMDC, which has a five-year supply contract with Japanese and South Korean companies, will renew these in April. The contracts are annual in nature.

“As the nature of trade has shifted from annual to quarterly contracts across the world, we are also mulling quarterly contracts. However, these decisions will depend on the approval of the central Cabinet,” he said.

NMDC produces around 30 million tonnes iron ore per annum, out of which 10 per cent is exported.

Recently, iron ore prices in the international market touched the $190-200 mark per tonne on a freight-on-board basis on the back of Chinese demand and supply constraints in major producing nations like India.

The ban on export of iron ore from Karnataka and closure of some mines in Orissa and Chhattisgarh to check illegal mining have also contributed to the spurt in prices.

“Prices are expected to remain firm in the near term due to build-up of inventories in China along with strong economic recovery, which will lead to higher steel consumption,” said an analyst with a Mumbai-based brokerage firm. Iron ore prices, which have been in the $120-200 per tonne range for various grades of late, rose around 15 per cent in January.

NMDC is also planing to raise domestic iron ore prices for supply contracts from April 2011. “The price revision will also be done for domestic supply contracts,” said the NMDC official.

“Though a price revision in domestic contracts is difficult to determine at this point in time, we will factor in the freight rate hike by the railways in recent times.”

However, everybody is not ready for a price rise. “It will be very difficult for any company to ask for an increase in iron ore prices in the near future as prices are expected to see a correction of $50-60 per tonne,” said Basant Poddar, managing director of Mineral Enterprises Ltd and vice-chairman of the Federation of Indian Mineral Industries (FIMI)-South. Poddar said many iron ore mines were expected to become operational in new areas of Australia and other producing nations and this would ensure a dip in prices.