Anticipating erosion of bottomline due to the twin effect of iron ore price hike and decline of steel prices, state-run Rashtriya Ispat Nigam has urged steel ministry to impress upon NMDC to bring down prices of key steel input.
“While we recorded a reasonable level of profit in Q1 of this fiscal, our bottom line is severely affected in Q2 due to sharp increase in the price of iron ore,” RINL has said in a monthly report to the steel ministry.
RINL had recorded around Rs 3,000 crore turnover in the first quarter of the current fiscal, registering a growth of 16 per cent over the same quarter last fiscal. However, it did not divulge the amount of net profit for the quarter.
Public sector NMDC had increased the contract price of iron ore by 8-13 per cent for the July-September quarter.
During the immediate previous quarter, it had hiked iron ore prices by 8-10 per cent as well.
“The impact (due to hike in iron ore prices) is about Rs 15 to 20 crore a month depending on the grade of supply of iron ore — fines, lump, CLO and DRCLO. The increase in the price of DRCLO is 13 per cent due to which there will be hardly any margin for RINL considering the sharp decline in steel prices,” RINL said.
“The prices of DRCLO are 52 per cent higher than lump with not much benefit in its usage vis-a-vis lump. As we have no other option, we have already requested NMDC to stop the supply of DRCLO,” it added.
RINL said it was making all efforts to improve the bottomline through improvement in techno-economic parameters and cost reduction measures to nullify the impact of decline in market prices of steel.
“We would be grateful for your intervention for reduction in prices of iron ore,” it said in its report.
Meanwhile, it said against the target of Rs 1,050 crore for 2012-13 for capacity expansion, an expenditure of Rs 432 crore was achieved up to August. The investment would pick up during the coming months, it added.