⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

Exclusive-India proposes national iron ore exchange to tackle price anomalies, document shows

Published 04/02/2024, 06:36 AM
Updated 04/02/2024, 06:42 AM
© Reuters. FILE PHOTO: A worker cuts iron rods outside a workshop at an iron and steel market in an industrial area in New Delhi, India, December 12, 2017. REUTERS/Adnan Abidi/File Photo

By Neha Arora

NEW DELHI (Reuters) - A government-appointed panel has proposed setting up India's first iron ore exchange to determine the domestic sale price of the key steelmaking raw material, according to a document reviewed by Reuters and a source with direct knowledge of the matter.

After the Ministry of Mines pointed out that some iron ore miners tried to keep the average sale price artificially low to pay lower royalties to the government, the federal government late last year formed a panel to work out an "alternative mechanism" to determine domestic iron ore prices.

"As a long-term measure to solve the issue of transparency in the returns being received, (the) Ministry of Mines should develop a National Iron Ore exchange, mandating the buying and selling of iron ore on the online platform," the panel said in its recommendations, according to the document.

Details of the panel's recommendations have not been previously reported.

The proposed exchange would record real-time transactions and physical delivery of iron ore, the document said.

"Once the exchange is implemented, ASP (average sale price) for each state and grade can be auto-published every month, based on the weighted average of monthly sales on online platform," it said.

Currently, prices of the same grade of iron ore differ widely across the country, creating an anomaly which the panel believes makes it easier for miners to lower rates artificially to avoid higher royalty payments to the government.

India's cabinet will consider the recommendations of the panel, said the source who could not be named because the proposal is not public.

The federal mines ministry did not immediately comment on a Reuters email seeking comment.

The panel has also recommended the use of blockchain technology at the exchange, according to the document.

The technology allows stakeholders such as miners, traders, buyers, and government agencies to quickly and securely share verifiable information.

The panel did not favour using an international index to determine the average sale price for iron ore.

"Not only (is the) international iron ore price is highly influenced by (the) Chinese economy and steel demand, but also has been highly volatile in comparison to domestic prices," the document said.

"Linkage of iron ore ASP with the international price has serious repercussions for raw material planning and export competitiveness for (the) domestic steel industry."

© Reuters. FILE PHOTO: A worker cuts iron rods outside a workshop at an iron and steel market in an industrial area in New Delhi, India, December 12, 2017. REUTERS/Adnan Abidi/File Photo

India is the world's fourth-biggest iron ore producer and also ships the majority of its iron ore to China.

In top iron ore consumer China, sellers use a mix of reference points such as the benchmark from S&P as well as the futures index and other local indices for domestic transactions.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.