Iron ore price hike put steel makers in a fix,Technology

 Iron ore miner NMDC has hiked the prices by 8-13 per cent, which steel makers termed as an attempt to cash in on the current "monopolistic" circumstances of the business.

"The NMDC board, which met on Tuesday, has decided to increase the contract price for the July-September by eight per cent for fines and 13 per cent for lumps," a source, who was present at the meeting, said.

This is for the second consecutive quarter the state-run miner has raised prices of raw material in this fiscal. During the last quarter, it had increased prices by 8-10 per cent on increased demand and lower availability.

Following the hike, price of lumps with 65 per cent iron content would go up to Rs 6,100 a tonne and up to Rs 3,000 a tonne for fines containing lesser iron. Indian steel mills mostly use lumps.

The domestic steel industry dubbed NMDC's move as an attempt to cash in on the monopolistic circumstances of the business, at present.

"It is unfair on the part of NMDC to increase the price of iron ore when international prices are coming down. At the prevailing environment, NMDC has monopoly in the business and it is just trying to cash in on the situation," a steel industry official said.

Another official from a leading steel maker said the move would put the steel companies in a fix, as in the face of squeezed global demand and subdued price, domestic steel firms would not be in a position to pass on the increased cost to customers.

"This will lead to thinner margins for steel makers," the official said.

NMDC had lowered iron ore price by up to Rs 160 per tonne for lumps and Rs 600 for fines in the last quarter of 2011-12 fiscal, after hiking the price in the previous quarter.

The source said despite being a lean period for the construction activity during the current monsoon season, the demand for steel saw no signs of abatement resulting in the spike in demand for iron ore.

"Price is a factor of demand and supply," the source said when asked the rationale behind the steep hike.

NMDC is the country's largest iron ore producer. It has over 40 per cent domestic market share. JSW Steel and Essar Steel are NMDC's leading customers in the country.

Iron ore is in short supply in the country as a result of the ongoing ban on mining in Karnataka for over a year now and the closure of some mines in Goa, Odisha and Jharkhand have impacted iron ore production.

Total domestic production has come down to 169 million tonnes last fiscal. Industry body FIMI expects it to reduce further to 140 million tonnes in the current financial year.