Domestic steel firms, which are reeeling under 50% drop in prices in the last two months due to slackening demand from the consuming industries, have got some relief. The railway ministry has announced a discount of 10% to 50% on freight for iron ore exports carried over long distance, a move that is expected to help since iron ore is a key raw material for steel manufacturers.
This will translate into a minimum discount of Rs 200 per tonne and a maximum of Rs 1,500 per tonne on iron ore transportation. The concession will be available for iron ore freight being loaded in south eastern region, east coast and the south western region for distances over 350 to 400 kilometre. It will, however, be effective from November 8 to December 31. Sources said the decision will be reviewed after that.
Explaining the move, a Rail Bhawan official said, ?Internationally, the price of iron ore has dropped. Earlier when iron ore was being exported in a big way, we had hiked the freight. Now that the situation is no longer so, the freight has also been cut.?
According to an estimate by the Federation of Indian Mineral Industries (Fimi), iron ore exports from the country dipped by nearly 60% to 3.9 million tonne in October this year from the same month a year ago.
Iron ore prices have halved to around Rs 5,000 per tonne from May when it had touched a high of Rs 10,000 per tonne. Iron ore is a key raw material for steel manufacture and according to rough estimate 1.5 tonne of iron ore is required to make 1 tonne of steel. Consequently, steel too has become cheaper and in fact in a complete reversal of last year?s scenario, it is now the consumers who seem to be dictating prices.
Last week, integrated steel producers led by the country?s largest steel manufacturer, Steel Authority of India Ltd (SAIL) cut prices of flat products in the range of Rs 4,000-6,000 per tonne.
The railway ministry?s decision comes soon after the finance ministry swung into action. To help out the domestic steel industry, the finance ministry eliminated the 15% export levy on several iron and steel items, which it had introduced in May this year. At that time iron ore prices were at an all time high.
Steel industry analysts have projected a grim scenario for the industry as prices have come down crashing by 50% in the last two months. The crash in prices is mainly because of the slowdown in demand from key end-user segments like automobiles, infrastructure and construction.
For railways too, iron- ore traffic – an all important ?bulk commodity? has been reducing, and it hopes the concession will encourage more producers to transport more of the metal.