State-owned iron ore supplier National Mineral Development Corporation (NMDC) Ltd, which was expected to hike the price of iron ore, may not do so immediately as steel manufacturers have assured the government to hold steel prices for two to three months.
Recent increases in the steel prices have been singled out for blame as a major contributor to inflation. On the other hand, steel companies have been demanding the government to reduce the prices of domestic iron ore if they have to reduce steel prices to tame inflation.
A spokesperson of Assocham said, ?It’s possible that NMDC may not increase its ore prices immediately. There is tremendous pressure on the government to control inflation. Hence, it cannot expect private players to hold their prices and allow its own enterprise to hike raw material prices. Similarly, the industry is also putting pressure on the government to impose a 15% duty on iron ore exports to discourage export of the raw material.?
Earlier this month, steel producers agreed to a cut in prices by Rs 4,000 per tonne on flat products and Rs 2,000 per tonne bars and rods. The move is to help the government rein in inflation, that is nearing a rate of 8%.
?This is possible and we hope that the iron ore PSUs will hold its prices. If this happens, it will be a positive move in favour of the steel industry,? said a steel manufacturer on condition of anonymity.
However, the industry is also not entirely ruling out the possibility that NMDC may hike iron ore prices after negotiations with Japanese steel mills.
NMDC, that supplies iron ore to domestic steel producers, have informed long-term customers that the prices are subject to revision from April 1, 2008, but the quantum will be notified after negotiations with Japanese steel mills. By then, the Japanese firms
will complete their deals with the three global iron ore suppliers that is BHP Billiton, Rio Tinto and Brazilian Miner Vale. Also, Chinese firms have already signed contracts with global producers at the enhanced prices to the tune of 65% over 2007.
This could result in a similar increase in domestic prices of ore, with retrospective effect, feel some industry observers.
