Dearer iron ore won’t push steel prices: railways

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New Delhi, Apr 2 : Defending its decision to hike freight for iron ore, the railway ministry on Tuesday said it would not have much effect on steel prices. “The prices of steel are not increasing due to input costs. So increasing the freight for iron ore will not put pressure on steel prices,” VN Mathur member (traffic) railway board said. The hike in freight would increase the transportation costs of iron ore by 5.6 to 5.8%, Mathur said, adding that this was a negligible amount. As reported by FE earlier, the railway ministry hiked the congestion surcharge for iron ore for exports booked at railway sidings and goods shed to 100% and reduced it to 30% for iron ore for domestic markets. The ministry has also put iron ore in the higher freight class of 180.

Railway ministry sources had said the decision was taken mainly due to very high congestion on these routes. Mathur also pointed out that the railways is unable to meet the huge demand for wagons required for transporting iron ore from mines. In 2006-07, railways employed about 35-40 rakes a day for transporting iron ore. This was increased to about 50 rakes a day in 2007-08. However 25% more rakes are required every day which railways is unable to meet, Mathur said.

Steel industry sources had however said steel prices would certainly rise, as the freight changes would hike transportation cost of iron ore by about Rs 15 a tonne to about Rs 185 a tonne. Iron ore is a key raw material for steel manufacture and according to rough estimate 1.6 tonne of iron ore is required to make 1 tonne of steel.

However despite frequent freight changes in the metal, railways iron ore transport business has done well.