NMDC may review iron ore exports to Japan, Posco

May 25, 2008

May 25 (Business Standard) – India’s largest iron ore producer and exporter, NMDC Ltd, may review exports to Japanese steel mills and South Korea’s Posco in a bid to increase availability in the domestic market and restore the anomaly in net realisations from exports and domestic prices.

Currently, domestic prices are higher than export realisations by 97-231 per cent, depending on the grades and mines.

Sources close to the development said that if the Japanese mills and Posco do not factor in the export duty of Rs 300 per tonne imposed by the government during negotiations for the new iron ore contract, there could be a rethink on exports. The prices for the Japanese mills and Posco have always acted as a benchmark for domestic iron ore prices.

Steel Secretary RS Pandey said that last year when prices had been fixed with the foreign mills, there was no export tax. “When NMDC goes for fresh negotiations this year, they will take up the matter,” he said.

However, he declined to comment on whether it could lead to a review of exports to foreign buyers.

Of a total production of 30 million tonnes of iron ore from its Bailadila mines in Chhattisgarh and Donimalai in Karnataka, NMDC exports around 3 million tonnes to the Japanese mills and 400,000 tonnes to Posco, and sells the balance in the domestic market. NMDC accounts for 15 per cent of the country’s total iron ore production.

The public sector miner supplies to most domestic steel companies that do not have captive mines, like Essar Steel and Ispat Industries. The entire requirement of the state-owned Visakhapatnam Steel Plant is also met by NMDC.

Sources said the discussions with the Japanese mills, which could happen by the end of next month, would centre around compensation for the increase in railway freight, reimbursement of export duty on iron ore and additional bonus for Baila lump.

The export duty proposed in Budget 2007-08 was implemented around the middle of last year and is Rs 300 per tonne for ore having more than 62 per cent iron content.

The Indian delegation to Japan and South Korea normally comprises officials from the ministries of steel and commerce, apart from MMTC and NMDC.

NMDC has been supplying iron ore to MMTC under a five-year contract signed between the two. However, pricing and quantities are fixed every year through a memorandum of agreement with the international buyers.

If the international benchmark of 65 per cent increase is applied to NMDC’s ore and if the export duty is borne then the realisations from exports would be higher than domestic prices.

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