KOLKATA (miningweekly.com) - Indian domestic iron-ore prices were moving in the opposite direction to global trends with steel producers facing a double whammy of shortages and high raw material costs.

NMDC Limited, the country’s largest iron-ore miner, has announced that it would maintain the higher price levels during July after implementing a hike last month.

The miner said that in the case of high-grade lumps it would maintain the price of $77/t while in the case of fines it would continue to charge $53/t for July shipments.

In June, NMDC increased the price of lumps by $5/t and that of fines by $4/t, at time when global iron-ore prices have been in a tailspin.

Global iron-ore prices for high-grade fines (iron content 63.5% and above) fell below the $90/t mark last month, before making a tentative recovery to around $93/t to $94/t currently.

According to Indian miner-exporters and traders, despite the sharp fall in offers, local iron-ore fines were finding very few buyers from traders representing Chinese steel mills.

Most Chinese steel mills were facing a very tight liquidity situation and were maintaining the lowest level of raw material stocks to cut down on inventory carrying costs; therefore, transaction volumes in the Indian export market were negligible despite the fall in offer prices, they said.

However, the fall in prices and export volumes had no salutary impact on domestic supplies or prices as overseas shipments were primarily fines, while domestic steel mills were equipped for only high-grade lumps as feedstock, the traders said.

According to an official of Rashtriya Ispat Nigam Limited (RINL), a government-owned steel company which sourced ore from NMDC, it was "strange" that the latter was maintaining a higher iron-ore price in the domestic market at a time when international prices were weakening, when the avowed policy of the miner was to follow international price parity for its domestic pricing strategy.

Apart from prices, domestic steel producers were facing a shortage of supplies with several companies, such as JSW Steel and Tata Steel, having concluded import contracts to tide over the situation.

But officials in these two firms said that dependency on imported iron-ore was not sustainable over the medium term despite lower international prices.

It was pointed out that while import duty on iron-ore was levied at 2.5%, finished steel imports from Japan and South Korea attracted import duty of only 1.9% and, hence, both the higher domestic iron-ore price and landed price (CFR plus import duty) were making local steel production uncompetitive.