JSW Steel and Kalyani Steel, major customers for Karnataka miners, including NMDC, did not respond to queries on the subject. However, officials at these companies have said the price cut is not enough; ore sold in other states is of better quality and competitive.
Opposing this argument, Basant Poddar, a senior figure at the Federation of Indian Mineral Industries, said: “Iron ore sales are under a Supreme Court directive. Neither ore or pellets can be exported. Further price cuts will severely dent the working of iron ore mines.”
Also, other mining companies in Karnataka say a further price cut will substantially hit the working of iron ore mines in the state.
Steel prices in the spot market have, however, declined by Rs 500-700 a tonne in the past three days, reflecting weak demand from consumer industries. Currently Rs 38,633 a tonne, the benchmark variety of TMT (ex-Mumbai) shows a rise of 14.3 per cent since December 2017. Hot rolled coil in the spot Ludhiana market is up 18 per cent since December, to trade at Rs 46,000 a tonne.
“Prices have been rolled over for July. The movement depends upon a number of factors — demand, import, trend from competition and also raw materials. While the short-term prospects for steel prices look range-bound to sluggish, the long-term prospects are good, assuming robust demand post monsoon,” said a spokesperson of Steel Authority of India.
Cheaper import is also keeping steel prices under pressure. “Owing to the ongoing trade war between China and the United States, a lot of steel is being imported into India at cheap rates,” said a spokesperson from Essar Steel.
The pile-up of iron ore in Karnataka has forced mining companies to reduce price in the state. Said a big mining company official of the region, “Iron ore is already under-priced.
A further price cut is detrimental not only to miners but also impacts state revenue -- around 30 per cent of the price goes to the state exchequer in the form of royalty and other charges. Import of ore from other states is worsening the problem. The e-auction process has been a failure. It is now time for ore prices to go by global benchmarking indices.”
Analysts, therefore, forecast steel prices to remain stable in India in the short term, followed by a robust recovery after the monsoon. Depreciation in the rupee is likely to make import of both raw materials and finished products costlier.
“However, long-term prospects look positive, given an improvement in domestic demand, a weak rupee and strong raw material prices, like those of iron ore and coking coal,” said Goutam Chakraborty, analyst with Emkay Global Financial Services.