Publisher Information Firms Battle to Control Iron Ore in India Paul Glader. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 10, 2007. pg. B2A Abstract (Document Summary)

Contract prices for seaborne iron ore in 2007 have risen 9.5% more recently, the fourth annual increase. Iron-ore prices are at record highs, and steel mills in China are offering to pay for as much iron ore as India will sell. India's iron-ore exports rose to about 100 million metric tons last year from 41.6 million metric tons in 2002. India is the third-largest iron-ore exporter, after Australia and Brazil, and the fourth-largest producer, behind China, Brazil and Australia, according to Hatch Consulting in Pittsburgh. R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries trade group, said he would like to see more iron ore from India shipped abroad for profit while global iron-ore prices are high, rather than held captive for steel making. He said more exploration and mining of iron ore in India could discover greater reserves, making India a larger power in the iron-ore industry. "The more intense discovery you do, the more extensive resources you come across," he says. Steel companies disagree. "The highest quality iron ore should be reserved here rather than exporting it," says Vikram Amin, marketing director at Essar Steel Ltd. of Mumbai. He says India may have enough iron ore for only the next 55 years and argues that keeping more iron ore inside the country for use in domestic steel plants means companies such as Essar will add more value to the iron ore. Such companies would make slabs or steel for sale at 10 to 15 times the price of a ton of iron ore and create more jobs and downstream industries in India's economy, he says.

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(c) 2007 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. MUMBAI, India -- In a developing world hungry for commodities, a brawl is raging in India over what to do with the nation's precious iron-ore reserves. Steel-hungry markets such as China and Europe are willing to pay more for access to that primary steel-making ingredient. Iron-ore miners and prospectors want rights to explore, mine and export more iron ore from India to the highest bidder. Foreign steel firms building plants in India, such as South Korea's Posco and Europe's Mittal Steel Co., want rights to mine iron ore in India near plants they are building. Domestic steel companies in India want their own captive reserves of iron ore, arguing that steel making within the country is the best way to add value to India's natural resources and that they should have dibs on them because they are home-country producers. Contract prices for seaborne iron ore in 2007 have risen 9.5% more recently, the fourth annual increase. Iron-ore prices are at record highs, and steel mills in China are offering to pay for as much iron ore as India will sell. India's iron-ore exports rose to about 100 million metric tons last year from 41.6 million metric tons in 2002. India is the third-largest iron-ore exporter, after Australia and Brazil, and the fourth-largest producer, behind China, Brazil and Australia, according to Hatch Consulting in Pittsburgh. R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries trade group, said he would like to see more iron ore from India shipped abroad for profit while global iron-ore prices are high, rather than held captive for steel making. He said more exploration and mining of iron ore in India could discover greater reserves, making India a larger power in the iron-ore industry. "The more intense discovery you do, the more extensive resources you come across," he says. Steel companies disagree. "The highest quality iron ore should be reserved here rather than exporting it," says Vikram Amin, marketing director at Essar Steel Ltd. of Mumbai. He says India may have enough iron ore for only the next 55 years and argues that keeping more iron ore inside the country for use in domestic steel plants means companies such as Essar will add more value to the iron ore. Such companies would make slabs or steel for sale at 10 to 15 times the price of a ton of iron ore and create more jobs and downstream industries in India's economy, he says. The government of India had proposed capping iron-ore exports at 100 million metric tons by 2020, but iron-ore miners are predicting they will export 110 million to 120 million metric tons of steel this year. That frustrates and concerns steel companies. They argue it is more economical to make steel in India rather than in China because India has both high-quality, plentiful raw materials and low-cost labor while China has low-cost labor but is short on raw materials. "Today, many of our companies are producing cheaper than in China," says R.S. Pandey, secretary to the government of India's Ministry of Steel, pointing out that Indian steel companies might be a more logical place to produce and export steel rather than in China. "Everyone wants to expand their capacity in India for which they need iron ore resources." A committee of government officials and various industry interests called the Hoda Committee, named after the panel's leader, met about two dozen times in 2005 and 2006 to hash out policy recommendations for iron-ore mining. The panel has suggested increasing exports of lower-grade iron ore as the product is a major item in the country's export portfolio. The panel has also recommended earmarking some iron- ore reserves for steel companies building plants in the region, guaranteeing low-cost iron ore as a reward for industrial development. Now, government bodies in India are examining the Hoda Committee recommendations and are considering possible changes to the nation's mining and mineral-development laws that date back to 1957. Upstart Indian steel companies such as Essar Steel, a division of Essar Group, and Ispat Industries Ltd. are eagerly waiting to get rights to mining leases. "We're doing all right," said Vinod Garg, marketing director for Ispat Industries. "But if we had iron-ore mines, we'd be doing better." Already, the government of the state of Orissa in India has approved an application by Posco for a license to prospect for steel in the region, where it plans to build a $12 billion steel plant, to be constructed in phases. Netherlands-based Mittal Steel is also seeking mining rights in Orissa. But the tension between mining and metal-making interests will likely rage for several years and decades as both groups wrestle over rights to iron ore leasing and export licenses from state and federal governments. Mr. Sharma, who represents iron-ore mining interests on this issue, said he would like to see no captive mines for steel companies. He argues that some steel companies are just trying to corner the market and increase their margins and pricing power, rather than passing along benefits to customers. He questions whether steel demand in India will actually increase to 200 million metric tons a year by 2020, as government officials predict. He said he thinks infrastructure development and steel demand in India will grow much slower than that and suggests India develop its iron-ore business to parallel Australia, which is more export focused rather than focused on domestic steel production. He said foreign mining giants such as Australian-British miners BHP Billiton Ltd., Rio Tinto PLC. and Brazilian miner Cia. Vale do Rio Doce should be allowed to come to India for fast exploration into new iron-ore reserves. "If you don't dig iron ore, how will you make more steel and employ more people in the downstream industries?" he says. "You can't have employment within steel without producing iron ore first."