The Indian government is mulling slew of measures to cool down steel prices, up 55 percent this fiscal and producers hiking base price four times over the last quarter, a government official said on Friday, December 25.
He said that with Union Minister of Highways, Nitin Gadkari, flagging rising steel prices and cascading effect leading to sharp escalations in government infrastructure and housing project costs, the government is holding a series of inter-ministerial meetings to consider ‘corrective measures’ to rein in steel prices.
Gadkari has already alleged cartelization of steel and cement producers in hiking prices ‘unreasonably’ taking advantage of government policies to revive industrial activities impacted by the pandemic, though steel producers claim rising price of raw materials, shortage of iron ore as cause of higher finished steel prices.
Among the measures under consideration of the government is setting a high floor price for export of iron ore, which is expected to increase volume of domestic sales by merchant miners and increase supplies to steel mills without captive mines.
At the same time, a high government set floor price below which miners will not be allowed to make overseas shipments will also prevent misdeclaration of high grade iron ore fines and lumps as lower grade and export higher volumes to avoid export duty, the official said.
It was pointed out that with China sharply reducing import of ores from Australia, Indian exports of iron ore to China was up 73 percent during April-November 2020, compared to corresponding period of previous year.
Indian steel producers claim that rising domestic steel prices is directly related to local iron ore lumps and fines prices which more than doubled since June 2020. However merchant miners represented by Federation of Indian Mineral Industries (FIMI) has maintained that idle iron ore stockpiles have been rising steadily currently at 162 million mt, up from 151.5 million mt in 2018-19. According to FIMI, domestic steel mills are only interested in mining higher grades of 62 percent FE content and higher, and if they mined lumps and fines with 58% FE content and higher which attracted 30 percent export tax, miners will not need to export and domestic steel mills will not face raw material shortages.
The option of lowering import duties on steel products is ‘also very much on the table’ to increase supplies in the local market and import competition triggering softening of domestic steel prices, the official added.