Iron ore prices fall but steel makers unhappy

05 December 2008

The National Mineral Development Corporation (NMDC) has reduced the prices of iron ore for domestic long-term contracts by around 25 per cent.

The new price band will be in the range of Rs1,500 to Rs3,500 a tonne against the earlier band of Rs1,900 to Rs4,100 a tonne. The new prices are being brought into effect retrospectively from 1 December 2008. NMDC says it will hold the prices for the next four months till March 2009.

NMDC meets about 30 per cent  of the iron ore requirements of domestic steel companies including Ispat Industries, Essar Steel, JSW Steel and Rashtriya Ispat Nigam Ltd, which have long-term supply contracts with NMDC. 

The two largest steel makers - Steel Authority of India and Tata Steel - have their own captive mines and do not source iron ore from NMDC under long-term contracts.

Price mismatch
Steel makers have been hard hit due to the fall in steel prices, which have   now down to around 50 per cent from the peak of $1,250 in May this year to around $550-600 a tonne.  

The falling demand coupled with a stockpile in China after the Olympics has added to the woes of the steel makers. Similarly, global iron ore spot prices too have come down from the peak of $140 a tonne in May-June this year to $65-70 a tonne today.