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Country's largest iron ore producer NMDC maintaining status quo on the price front at a time when international rates have nosedived to five-year low has not gone down well with its domestic customers, including Rashtriya Ispat Nigam.
Vizag-based Rashtriya Ispat Nigam has recently sought the help of the Steel Ministry. It has asked Ministry to intervene in this issue as the costlier raw material was impacting its margin in a "difficult market".
Both NMDC and RINL are under the administrative control of the Steel Ministry.
"Global iron ore prices have softened significantly over the past one month and is trading at around $82-85 a tonne.
"However, NMDC, RINL's only source for supply of iron ore, has not adjusted the prices in tandem with international price movements, impacting our margins in a difficult market. Help of the Ministry of Steel is needed in this regard," RINL said.
NMDC has been holding on the prices for last three months even as global prices have nosedived to its five-year low in recent times. The PSU miner reviews prices every month by judging demand and global price.
When contacted, NMDC Chairman Narendra Kothari said RINL did not write to him on the price issue.
The price of NMDC's lump ores, which contain more iron and are used mostly by domestic steel makers, now stands at Rs 4,600 per tonne and the prices of fines, having lower iron content, at Rs 3,160 a tonne.
A senior official of a private sector steel maker, who wished not be named, said the imported iron ore is cheaper by about $10 than domestic prices.
Around 1.7 tonnes of iron ore are needed to produce one tonne of steel.
"Hence, the steel-making cost of the Indian steel makers using domestic ore is going up by around $20 per tonne, rendering Indian steel expensive and vulnerable to cheaper imports," he said.
Hinting that NMDC was trying to cash in on the domestic demand-supply mismatch, he said, "Indian ore prices continue to remain high due to domestic demand-supply situation."
JSW Steel, which is a major customer of NMDC, has already started importing by about 0.5 million tonnes of iron ore per month. Tata Steel, which has also recently participated in an auction conducted by NMDC to sell its surplus ore, may also follow suit following the closure of its Noamundi mine in Jhrakhand.
The Steel Ministry has already written to the Finance Ministry seeking to abolish import duty on iron ore from the present level of 2.5 per cent.
