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Essar Steel, RINL see red over NMDC ore pricing

Two domestic steel manufacturers ? Essar Steel and the state-owned RINL ? which do not have captive iron ore mines and mainly buy the raw material from the country’s largest iron ore producer, NMDC, have accused it of charging higher prices despite falling international prices.

Two domestic steel manufacturers ? Essar Steel and the state-owned RINL ? which do not have captive iron ore mines and mainly buy the raw material from the country’s largest iron ore producer, NMDC, have accused it of charging higher prices despite falling international prices.

In a letter to the NMDC chairman, Essar Steel said that the mining PSU increased the price of iron ore with effect from April 1, 2012, for long-term customers even though international prices of ore were continuously falling. The increase has been in the range of 40-90% for Baila fines and lumps, which are being supplied by NMDC to steel mills in Japan at much lower rates, the company said.

Sources said Rashtriya Ispat Nigam has also pointed out the ?undue? price increase by NMDC and brought it to the notice of officials in the steel ministry to build pressure on the miner to make domestic iron ore prices reflective of the global prices.

?It?s unfair that when the price of the commodity falls nearly 19% in China, we are being forced to pay higher. We are waiting for the next month to see whether better sense prevails and NMDC actually cuts ore prices for the second quarter,? said a senior official of RINL, asking not to be named.

To a query raised by Fe, NMDC?s acting chairman, CS Verma, said the company fixes its quarterly prices based on the prevailing market prices of ore in the domestic market.

?NMDC prices are always competitive and are governed by dynamics of demand and supply,? said Verma. Another senior NMDC official earlier acknowledged the letter written by Essar Steel and said the company follows a transparent pricing system, which is approved by its board and is universally applicable to all long-term customers without discrimination.

?NMDC has entered into export contracts where its net sales realisation is lower than the prices paid by domestic mills, which is eroding the competitiveness of Indian steel mills in the market place. Hence, we have requested NMDC to bring domestic prices on a par with their net export realisation,? said an Essar Steel spokesperson.

Essar Steel has written to the state-run PSU demanding immediate slashing of domestic prices, keeping them in line with export prices to Japanese Steel Mills. Essar has also requested NMDC to reverse the increase in prices effected during Q3FY12 and revise the prices fixed for Q4 of 2011-12, citing the same reasons.

Steel players, including Essar Steel, have urged NMDC to consider exports to Japanese mills only after meeting the requirements of the domestic steel producers who are totally dependent on NMDC for supply of iron ore.

In its letter, Essar has said that while the derived netback price realisation to NMDC for the recent order of Baila fines and lump works out to R1,990 and R2,890 per tonne, respectively, on ex-mines basis, domestic customers like RINL, JSW Ispat, KIOCL and Essar were being charged R2,800 per tonne for Baila fines and R5,480 per tonne for Baila limp. This is 40% higher for fines and almost 90% for baila lump over the net back from the Japanese steel mills? FOB export price.

This comes even as the price of ore, as measured under IODEX 62% (iron ore index for ore with 62% fe content), fell more than 25% between September 2011 and June 2012.

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First published on: 09-06-2012 at 03:55 IST
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