* For other news from the Reuters Global Mining and Steel
Summit, click: here
* Supply contracts with Japan, S.Korea up for
* South African Sasol may get 10 pct equity in new
By Ratnajyoti Dutta and Krittivas Mukherjee
NEW DELHI, March 22 India's top iron ore miner
NMDC Ltd expects to renew soon a five-year iron ore
contract with Japanese customers which expires at the end of
March, the company's top executive said.
"India and Japan will have to renew the contract which they
had for the last five years. I am sure there will be an
agreement signing," state-run NMDC Chairman Rana Som told the
Reuters Global Mining and Steel Summit.
NMDC supplies to a consortium of Japanese steels companies
called Japan Steel Mills and to POSCO in South
He added that despite power shortages from the earthquake
and tsunami that crippled production at several steel mills and
other industrial units, Japan had not asked for supplies to be
"It could be that the Japanese are trying to see a situation
(where) they would like to manage some supply and bring it back
to the stock so that whenever they start production, they will
not have to wait for the stocks to come.
"I believe at least so far as contract negotiations are
concerned, they will try to maintain the continuity not
withstanding the fact that the physical lifting will be affected
by their economic condition."
NMDC's contract with South Korean importers is also up for
review and Som said he was confident that a deal would be
NMDC's contract with Japan Steel Mills was on an annual
basis for the first four years. The buyers had agreed to switch
to a quarterly price mechanism in line with other firms such as
BHP Billiton for the 2010/11 fiscal year.
The current price agreement for the January-March period
with Japanese steelmakers and South Korea's POSCO has been fixed
at about $140 per tonne for iron ore fines and about $158 for
lump variety on free on board (FOB) basis.
IRON ORE PRICES
Global iron ore prices will bottom out at about $140 per
tonne because of reduced demand from disaster-hit Japan, but the
trend could reverse in six months, Som said.
Spot iron ore prices .IO62-CNI=SI had lost about 14
percent since touching record highs near $200 a tonne in
mid-February as slow Chinese steel demand turned off buyers and
worries emerged lower Japanese steel output could hit its iron
Som said iron ore prices may continue to fall over the next
six months, before a demand-driven rebound drives prices to
"beyond $170" per tonne.
"Once the Japanese steel mills start their production, they
will have to build more stock, so therefore this phenomenon of
falling prices of iron ore and lack of demand from Japanese
steelmaking could be a short-term phenomenon," Som said.
"I am expecting in about six months or so the whole
situation will have a different trend. What will happen is that
Japan will start the reconstruction in a big way so their
production will pick up and it will pick up at the pre-recession
Indian prices generally follow the global market, dominated
by Australian and Brazilian miners, with China buying on spot
basis for its low-grade ore needs.
India, the world's third-largest supplier of iron ore,
produced 226 million tonnes in 2009/10 and exported 117.37
million tonnes, most of it to China and about two percent of it
OUTPUT, OVERSEAS ASSETS
NMDC produced about 25 million tonnes of iron ore in
2010/11, mostly for local sales -- slightly below recent
averages of 29 million tonnes. Som said the company was expected
to up production by two million tonnes in 2011/12 on improved
"We are keeping a provision of three million tonnes
(for exports) and balance 28 million tonnes for domestic
market," Som said.
Iron ore exports from India are likely to fall 35 percent to
about 58 million tonnes in the next fiscal year, weighed by
environmental curbs, a four-fold rise in export tax and a
continuing ban on exports from a major producer state.
Som said though NMDC had a comfortable reserve of iron ore,
it was hoping to achieve "long-term raw material security"
for Asia's third-largest economy through overseas
acquisition of mines, including two assets in Australia over the
next two months.
"So NMDC's approach in iron ore has been that it will join
hands with junior miners for developing the mines, exploring it
and developing it and then mining it."
He said the mines could start production in about 30 months.
The output from the two Australian mines will be over and
above the company's production target of 50 million tonnes by
2014/15. Som did not say how much the two mines could produce.
NMDC has signed a deal with state-run Coal India
and the eastern state of West Bengal to develop a two billion
tonnes coal block. The project is awaiting clearance from the
South Africa's Sasol has evinced an interest in
acquiring a minority stake in the project to produce liquid fuel
from coal. Sasol signed a deal with India's Tata Group last year
to invest $10 billion in a similar coal-to-liquid project in
eastern Orissa state.
"They (Sasol) want equity partnership of about 10 percent.
It is absolutely fine," Som said.
"Coal India and we get the major equity and some equity will
also go to the West Bengal government."
India, growing at more than eight percent a year, will need
to keep burning cheaper fossil fuel to expand the reach of
electricity to the half of its one-billion-plus population
without power. India imports more than a third of its oil needs.
(Writing by Krittivas Mukherjee)