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Indian steel firms to cash in on iron ore price fall

MUMBAI (Commodity Online): India's steel producers heaved a sigh of relief as iron ore prices will fall soon.

After quarterly pricing norms came into effect, this is the first time that prices of iron ore, valid for the October-December period this year, will be lowered.

The price cut is expected to benefit large domestic steel companies such as state-owned Steel Authority of India, JSW Steel and Essar Steel , which buy through contracts from the National Mineral Development Corporation.

Prices have come down marginally in the current quarter. The decrease is about 5%. The move is in line with global trends as the start of the third quarter has seen a cut in prices. Following the global trend for iron ore contracts, NMDC has also reduced prices of ore exported to countries like South Korea and Japan by 13.3% to $130-147 a tonne for the third quarter of the current fiscal year.

The company exports about three million tonnes of iron ore every year to Japanese and Korean steel mills. The country's largest iron ore company produced 24 million tonnes of ore in 2009-10.

However, the lowering of input costs is not likely to be transferred to final steel prices immediately. Steel makers have already announced a price hike of anywhere between Rs 1000 and 1,500 per tonne in the current month.

The fall in ore prices is mainly led by lower demand from China, which is one of the biggest buyers of ore in global market. International miners like BHP Billiton, Rio Tinto and Vale are believed to have firmed up deals with Asian steelmakers at prices lower by 10-11% than those prevailing in the July-September quarter.

The situation is in contrast to the beginning of the year when large companies had sought up to 90-100% hike in prices in line with prevailing high ore prices.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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