Capping iron ore prices will be fatal for industry

27 March 2017

Amid talks of capping iron ore prices, miners body FIMI has warned that any such move by the government could prove fatal for the industry at a time when there are signs of turnaround.

Indias iron ore output is projected to grow to about 170 million tonnes MT this fiscal despite ban and has surged 27 per cent to 154.48 MT during April-January as against 122 MT in the same period of 2015-16.

If at all the government has to put a price cap, it should cap steel prices which impact millions of consumers through downstream industries instead of iron ore for which there are limited buyers a few steel companies, Secretary General, Federation of Indian Mineral Industries FIMI, RK Sharma told PTI.

Majority of steel companies have raw material security and only a few depend on iron ore from the market whereas steel is the key raw material for many downstream industries related to auto parts, construction etc and government should protect these consumers interests too, he said.

He also wondered why steel companies with abundant domestic iron ore resources were not able to meet their counterparts from Japan and Korea.

Any such attempt to put a cap on iron ore prices may spell doom for the industry at a time when there are signs of revival in the industry, Sharma said.As per FIMI projections, output is likely to reach 170 MT this fiscal.

An official said that the government has called a meeting of iron ore and steel companies on March 29 to discuss the issue of capping iron ore prices.

The meeting will have representation from Ministry of Coal as well apart from Steel and Mines Ministries. Steel Minister Chaudhary Birender Singh earlier this month had said a panel on iron ore pricing will submit its recommendations by the month-end.

Asserting that there should not be much fluctuation in the prices of iron ore, Singh has said that the government wanted iron ore prices to be competitive.

FIMI said the government undertook a slew of steps like imposing anti-dumping duties and MIP to safeguard steelmakers but failed to address the woes of iron ore miners with life of captive mines remaining only till March 31, 2020 after which auction route would be adopted.

FIMI said, As high as 145 MT of iron ore was lying at mine heads of which 123 MT was in Odisha and Jharkhand only which have maximum number of steel plants.The industry body also said that the countrys top iron ore producer NMDC was selling ore at less than half of the international prices.

Government had earlier said an expert group will be formed to study sale of iron ore by NMDC which will also analyse the mining giants ore pricing and auction.

The prices of ore 62 percent FE content have collapsed from a high of USD 150 per metric tonne in January 2013 to merely USD 40 per metric tonne by December 2015 on account of slowdown in Chinas steel production.Indias exports slumped from a peak of 117 MT in March 2010 to 4.5 MT last year, as per data.

According to Mines Secretary Arun Kumar, the countrys iron ore production has increased significantly to 154.48 MT during April-January of 2016-17 and total value of the ore produced during the 10 months stood at Rs 19,417 crore.

Iron ore output had nosedived with an average annual contraction of 9.4 per cent in 2012-16, following the mining ban in the three largest iron-ore producing states Goa, Odisha and Karnataka which has since been lifted.

Mining player Vedanta has recently said the worst phase for the domestic iron ore industry was over and exuded confidence that its Goa arm was prepared to sustain the export momentum amid softening global prices and subdued demand.