Date | March 14, 2016: India's largest iron ore miner NMDC has raised the lump price by a little over 8 percent to Rs 1,950 per tonne effective March 11, its first hike for the higher grade of the ore in over one-and-a-half years.
The state-run firm also raised prices for iron ore fines by 10 percent to Rs 1,710 per tonne for this month. Last time, NMDC had raised the prices of fines in November 2015.
The PSU miner had raised iron ore lump prices by Rs 300 to Rs 4,500 per tonne in June 2014. In the case of fines, the rates were hiked by Rs 100 to Rs 1,560 a tonne in November 2015.
Iron ore is the main ingredient used in making steel.
However, the hike by the Navratna company has not gone down well with other miners who counter that keeping in view the USD 10 per tonne rise in global prices of iron ore, the domestic rates could have been raised by around Rs 600-800 per tonne.
Iron ore spot prices (62 percent Fe content) surged by a little over USD 10 to USD 64/dry tonne earlier this week.
Currently, spot price for iron ore lump (62 percent Fe content) China port are in the range of USD 64 a tonne, while that of fines (58 percent Fe content) is at USD 50 a tonne.
A senior official from a mining firm said that NMDC is ignoring the market reality. It is keeping prices so low that it will impact other firms as well as is losing on revenue.
Already, it has been rapped by the Comptroller and Auditor General (CAG) for loss of revenue in the past, he added.
In 2012, the government auditor said the iron ore miner suffered Rs 745.94 crore revenue loss during 2007-10 for not revising the domestic prices of the steel-making raw material in line with prevailing market rates.
NMDC's hike of Rs 150 for lumps will put price at Rs 2,250 per tonne, whereas the imported ore is at Rs 5,650, the official said, adding that taking the difference in valuation of Hospet ore against imported to more than Rs 3,200 a tonne.
Another official from a mining firm said the increase is not sustainable and considering the prices of iron ore lumps and fines, even the minimum price differential between both the forms has not been maintained.
"Sintering cost should be at least Rs 500 per tonne and even that is not there. It could be because NMDC has a huge inventory of iron ore lumps and by setting the price between lumps and fines low it is thinking of easing that inventory," he added.
Sintering is the welding of small particles of metal by applying heat below the melting point. In iron ore, it is used to convert fines into coarse grained ore sinter that can be charged in to the blast furnace.
The official said that miner MSPL raised iron ore prices by about Rs 1,000 a tonne and it had a lot of takers, which too indicates that at that price the demand is still there.
He added that price of iron ore produced in India needs to be indexed with the prices at the London Metal Exchange (LME) as is the case with other metals.
(Source: http://www.moneycontrol.com/)