Global Biz

Iron ore price hike adds fuel to inflation

By Lan Lan (chinadaily.com.cn)
Updated: 2010-04-12 11:03

Boao, Hainan – An 80-90 percent price hike for benchmark iron ore prices will bring big inflation pressure to the world, said a top executive of Tata Steel, the world's 6th largest steel company.

"Three months ago we thought it would be 20 percent, and two months ago we thought it would be 50 or 60 percent. Now it looks they are looking for 80 to 90 percent," said B Muthuraman, vice chairman of Tata Steel.

"It's unfair and unreasonable. I also think it's not rational because there isn't a big rise in the production cost of iron ore from last year to this year," he said.

Muthuraman said the world is just coming out of a big recession and everybody should make sure to help combat inflation pressures, not the opposite.

"What I know the (iron ore) producers are doing is going to lead to big inflation in the world. So we must do everything to curb the price increase," he said.

The market demands remain weak and the steel companies cannot pass on the price increase of iron ore to the price increase of steel. The steel companies will face a difficult situation this year, including Chinese steel companies.

Iron ore are 100 percent imported in Tata Steel's European operations, which accounts for roughly 50 to 55 percent of its overall turnover. "We have a big challenge there," Muthuraman said.

But Tata Steel is in a lower risk than Chinese steel companies because its operations in India and other Asian countries are self-sufficient or based on waste steel, which generates higher profits than its European operations. China imports more than 50 percent of the iron ore in the world.

He called on steel makers to join efforts to boycott the price increase. "In such an economic situation no steel company can afford any price increase of iron ore," Muthraman said.