Indian steel makers may do well to prepare for costlier inputs with global consultancy firm PwC saying that prices of both iron ore and coking coal may go up again next year.
"My view is, you may see next year fairly stable pricing for iron ore and if anything, it may go up," Tim Goldsmith, global leader mining, PwC, told PTI in an interview.
Iron ore prices are hovering around $137 per tonne in the global market. India's largest iron ore producer NMDC Ltd often benchmarks the price of the key steel-making input in line with the international prices.
"I don't think you may see quite as much raw material as expected, particularly Brazil have challenges and demand is going to grow. So I feel pricing will stay similar to as they are today and if anything, it will have the opportunity to go up," Goldsmith said.
Internationally, the market for iron ore currently stands at around 1.5 billion tonne and almost half of them come from Australia and Brazil. The demand for iron ore generally goes up by 5-6% a year.
According to Steel Ministry's estimates, India, which has been a prominent exporter of the raw material in not so distant past, may have to resort to importing iron ore to keep pace with the demand from ongoing steel capacity expansions, both brownfield and greenfield.
Goldsmith said similar is the case for coking coal, a raw material that India's top steel producer and state-owned firm SAIL depends largely on imports for meeting the requirement.
"It is difficult to estimate the price of coking coal, because of the uncertainty of how much coking coal China is going to produce. Even so, I think you can see coking coal has less new production coming on stream next year. So there is a chance of an increase in the coking coal price as well," he said.
Steel Authority of India (SAIL) is paying its Australian coking coal suppliers $148 for a tonne for October-December quarter, a $6/ tonne higher than the contracted price for the previous quarter.
"So if you have a steel mill, you should be looking with a little of nervousness, because your cost input will go up... It was really tough for the steel industry to pass the higher input cost on to the customers in last two years," Goldsmith said.