State-run mining giant National Mineral Development Corporation (NMDC) has raised iron ore prices by Rs250-300 a tonne for June amidst supply constraints resulting from the closure of several mines in the country.
The hike would make iron ore costlier for smaller steel companies while private sector steel major Tata Steel and state-run Steel Authority of India may go unscathed as they depend mostly on captive mines for their raw material requirements.
The move, however, stoke steel prices at a time when prices are already at a high.
NMDC has raised the price of lump variety, which contains more iron and used mostly by domestic steel makers, by Rs300 per tonne and that for fines or lower grade iron ore by Rs250 per tonne, company sources said.
Following the hike, iron ore fines will cost around Rs3,160 a tonne against Rs2,910 earlier and the prices of lumps will go up to Rs4,600 per tonne from Rs4,300 a tonne a month ago.
Most private sector steel makers do not have captive mines and they consider the NMDC move as an attempt to take advantage of domestic supply shortfall, following the partial mining ban in Odisha.
Unlike SAIL and Tata Steel that have been immune thanks to their captive mines in states such as Odisha and Jharkhand, other steelmakers have had to bear the brunt of mining ban in Karnataka and Goa.
Now that the state government has lifted the mining ban in select mines, they feel, the price hike is unwarranted.
''Currently, steel companies are not in a position to absorb any increase in costs. Essar Steel is forced to pass on cost increase to its customers,'' an Essar Steel spokesperson said.
Essar Steel requires 15 million tonnes of iron each and JSW Steel needs 20 million tonnes per annum to their plants at full capacity.
NMDC, the country's largest producer of iron ore, had lowered the price of lumps by Rs200 in May. No changes in prices of fines were made last month. The company reviews prices every month.
In March and April, NMDC had kept lump prices unchanged, while it had raised the rates of iron ore fines by Rs100 per tonne in February. Due to sluggish market conditions, NMDC had hiked rates only thrice since November 2012 and that too only marginally.
The Supreme Court, on 16 May, halted operations at 26 mines in Odisha, which had been operating on the basis of automatic renewal of leases after the end of the first renewal period of 20 years. It also directed the state government to decide on the renewal of permits within six months.
However, the Odisha government on Tuesday gave its nod to reopen eight iron ore mines that had been shut. These include four mines of Tata Steel and three of SAIL.