Final Increase Could Be As Much As 75%
Indian state-owned iron ore miner, the National Mineral Development Corporation (NMDC), has hinted at a rise of between 34% and 56% in its base prices. The company has also suggested that prices will also rise substantially later on and any rise will be back-dated to 1 April. The company raised its prices by 16% in January.
NMDC supplies iron ore to India’s domestic steel producers that do not have their own captive iron ore supply.
Natural pellets will rise from Rs3258 to Rs5100 a tonne – a rise of 56% - but with an additional rise to come later, the increase is more likely to be in the order of around 75%. For iron ore fines the price will increase 34% to Rs2600 a tonne, and for calibrated lump ore, the price will rise 46% to Rs3800 a tonne.
NMDC’s long-term domestic pricing is based on recommendations by the Indian government’s Ganesan committee which has been used since 2006-07. The committee recommended that domestic prices should be calculated by taking into consideration the percentage change accepted by Japanese steel mills for NMDC’s product coupled with exchange variations on six-monthly forward rates on a yearly basis. As NMDC has yet to agree a contract with Japanese steel mills, the domestic increase is provisional. There are fears amongst Indian steelmakers that the domestic increase could increase by as much as 90% as Japanese steelmakers have accepted a price increase for the April-June quarter of 92%, to $106 a tonne.
Indian steel makers have already begun to increase their prices, especially as coking coal prices have risen sharply. Japan’s JFE has already agreed a coking coal deal for the April-June quarter of $200 a tonne, a rise of 55 per cent.
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