While steel secretary Aruna Sharma hinted at regulating iron-ore prices that “move like the Sensex” speaking to a TV channel, the producers of this key raw material for steel-makers have denounced the move as “bogus and foolish.”
While steel secretary Aruna Sharma hinted at regulating iron-ore prices that “move like the Sensex” speaking to a TV channel, the producers of this key raw material for steel-makers have denounced the move as “bogus and foolish.” Given that miners lay hands on iron-ore reserves by bidding for them and assuming market-determined pricing, it would be grossly unfair for the government to cap profits, they said.
Iron-ore accounts for 10% of the cost of steel-making for SAIL and Tata Steel which have 100% captive iron-ore, while in case of others which buy this raw material, the cost could be 20-25%.
“There needs to be some sharing of the profits (by iron-ore producers). We are working on the end-formula, and maybe we will come up with the logic very soon,” Sharma told the channel, against the backdrop of the fear that robust import demand from China will further jack up domestic iron-ore prices, which rose to their highest since August 2014 last month.
What the government might have in mind is not exactly capping the price of the raw material, but imposing a ceiling on profit margins somewhere between 30-40%, industry sources surmised. Yet it could amount to a throwback to history, when prices of many industrial goods were regulated, they said, adding that the idea was objectionable. “Mines are auctioned in India, unlike most other major natural resources-rich nations,” Federation of Indian Mineral Industries (FIMI) secretary general RK Sharma told FE.
Meanwhile, a committee has been set up in the steel ministry, at the directive of the NITI Aayog, to look at an ore pricing formula to ensure that the miners do not indulge in profiteering. The committee held its first meeting recently. Neither FIMI nor state-run iron-ore miner NMDC has any representation in the committee, said FIMI’s Sharma.
The idea of reining in iron-ore prices, sources in the steel ministry said, stemmed from steel-makers’ continuous tirade against “arbitrary pricing” by state-run NMDC, which private miners mostly follow. They also alleged shortage in iron-ore supply. Sharma, however, said a stockpile of 145 million tonne of iron-ore was lying at the mineheads, as of July 2016, for want of buyers. It generally takes 1.6 tonne iron-ore to produce one tonne of iron. India had produced around 90 mt of steel last year; however, more than half of it was through the induction furnace route, which does not require iron-ore as raw material.
The domestic steel sector has already received a lot of government succour. The government had in February last year imposed WTO-incompatible minimum import prices (MIP) in the range of $341-752 per tonne on 173 products to provide the domestic industry a level-playing field. It pruned the number to 66 in August and again in December extended the protection for 19 products for two months.
Meanwhile, in August last year, it imposed provisional anti-dumping duties in the range of $69-152 per tonne on hot-rolled coil and “HR not in coil”, after concluding these items are being imported into India at below normal (cost) price, for six months. In the same month, it also slapped anti-dumping duties equal to the difference between the landed value of the steel products and $594 per tonne on certain cold-rolled flat steel products for six months.
Again, last November, it imposed provisional anti-dumping duty on wire rod of alloy and non-alloy steel and in January 2017 on import of colour-coated sheets originating from China and the European Union into India, taking the total number of products under anti-dumping duty to 124. Pending investigations, anti-dumping duties would likely be extended for longer term. Safeguard duty has also been levied on some products.