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India to initiate price negotiations with Japan for iron ore export

02 Aug 2011 Evaluate

India has decided to start price negotiations with Japan for exports of iron ore by National Mineral Development Corporation (NMDC) after receiving approval from Cabinet on estimated quantity of iron ore exports for the next five years. In the coming few weeks, an Indian delegation, including senior officials from commerce and industry ministry, steel ministry and canalizing agency MMTC and NMDC will be participating in the price discussions. The exports prices are fixed in line with prices for Australian and Brazilian exporters.

NMDC has got approval to export 3.3 million tonnes of iron ore in current fiscal, as a part of new five year contract, its last contract period ended on March 31, 2011. The iron ore producing company exports less than 10% of its net production. The quantity export is based on long-term contracts forayed via MMTC to the steel mills in Japan and South Korea. The export contracts have been usually for 5 years based on Centre's nod. However, NMDC is facing a charge from Karnataka Lokayukta for under-invoicing for its exports to Japan and South Korea between 2006-07 and 2009-10.

However, Rana Som, Chairman and Managing Director of NMDC, denied all charges made in Lokayukta’s report, he said it was a case of “misunderstanding (on the part of the Lokayukta)”. Exports prices had been pegged on long-term contracts, which are sometimes below the prevailing spot prices, and this in turn could have led to the doubts regarding under-invoicing.

India is one of the largest suppliers of iron ore after Australia and Brazil, India mostly exports iron ore to China which has the world’s largest steel industry.

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