NMDC Hikes Iron Ore Prices To Boost Domestic Supply

In a bid to boost the subdued domestic supply scenario, the State-run National Mineral Development Corporation Ltd (NMDC) has raised iron ore prices by Rs 250-300 a tonne for June. But the decision taken by the NMDC will add to the problems of Indian steel-makers.

The country’s biggest iron ore producer has raised the price of lump variety by Rs 300 per tonne while the price of the fines or lower grade iron ore has gone up by Rs 250 per tonne for, a company source said. The lump variety contains more iron and is mostly used by domestic steel-makers.

Following the hike, iron ore fines price will go up to Rs 3,160 a tonne from the previous Rs 2,910 and lump prices will rise to Rs 4,600 per tonne from Rs 4,300 a tonne.

The price rise has not gone well with the private sector steel-makers who do not have captive mines. They described NMDC's move as an attempt to take advantage of the domestic short-supply scenario, mainly after the partial ban in Odisha.

On May 16, the Supreme Court had ordered closure of 26 mines due to non-renewal of year-old leases. The apex court also directed the state to decide on reopening them within six months. The state acted swiftly and allowed eight iron ore mines, including those of Tata Steel and Steel Authority of India (SAIL), to reopen in the recent past.

"Currently, steel companies are not in a position to absorb any increase in costs. Essar Steel is forced to pass on cost increase to its customers," an Essar Steel spokesperson said, commenting on the hike. Essar Steel requires 15 million tonnes of iron and JSW Steel needs 20 million tonnes per annum for their plants at full capacity.

NMDC had lowered the price of lump by Rs 200 in May, but iron ore fines prices remained the same last month. The company reviews prices every month.

The company kept lump prices unchanged in March and April while it had raised the rates of iron ore fines by Rs 100 per tonne in February. Sluggish market conditions forced NMDC to hike rates marginally thrice since November 2012.

Iron ore supply was not sufficient since the ban on mining in Karnataka and Goa. Although the ban has been lifted in these two states, production is yet to pick up.