Steel companies, including JSW, RINL and Essar, are crying hoarse over an increase in iron ore prices by NMDC as they cannot pass on the hike to consumers in an environment of low demand.
The decline in global iron ore price may not have any impact on domestic steel prices, especially for the companies that source most of their raw material from the country?s biggest iron ore producer NMDC. The miner has raised iron ore prices by R500-600 per tonne in its quarterly agreements with steel manufacturers.
The steel makers say the hike has put them in a tight spot as they are already struggling with their margins due to high input cost and low demand. ?We expect steel demand to pick up in the second half of this fiscal. So far, the demand for steel has been far below expectations, growing at around 5%. We can not pass on the iron ore price hike to consumers because we have to maintain our sales and supply,? a senior RINL official said.
NMDC has also almost doubled its e-auctioning prices of iron ore in Karnataka. The prices for 57-58 grade of the raw material, which were around R1,400 per tonne, have now reached R2,394. The steel companies in Karnataka said, it was difficult to procure iron ore at such prices and the hike would impact their production.
?At the moment, we are buying iron ore through e-auctioning only. The prices have doubled in the last three-four months. It is difficult for us to produce steel at this level,? BMM Ispat MD and CEO Dinesh Kumar Singhi said.
Though the domestic iron ore prices are still lower than international prices, there is a downward movement of prices globally. Steel prices have come down globally from $170 per tonne to $120.
However, experts said it was the right time for the miners to go for a price hike. ?The supply of iron ore is limited at the moment due to the ban in Karnataka. There are also problems in Goa and Orissa. For any mining company, it would be good time to go for increase in prices,? Nishith Sharma of Steelguru said.