A government-appointed panel in India has recommended the establishment of the country’s first iron ore exchange to determine the domestic sale price of this crucial steelmaking raw material, as per a document reviewed by Reuters and a source familiar with the situation.
Prompted by concerns raised by the Ministry of Mines regarding certain iron ore miners artificially suppressing average sale prices to reduce royalties paid to the government, a panel was formed by the federal government last year to devise an “alternative mechanism” for setting domestic iron ore prices.
The panel’s recommendations, as outlined in the document, propose the development of a National Iron Ore exchange to enhance transparency in revenue generation. The envisioned exchange would facilitate online buying and selling of iron ore, recording real-time transactions and physical deliveries.
Once operational, the exchange would enable the automatic monthly publication of average sale prices for each state and grade, based on the weighted average of monthly sales conducted on the online platform.
Currently, significant price disparities exist for the same grade of iron ore across India, creating opportunities for miners to manipulate rates artificially to evade higher royalty payments. The proposed exchange aims to address this issue and enhance pricing transparency in the industry.
The cabinet of India will deliberate on the panel’s recommendations, according to the undisclosed source. The federal mines ministry has yet to respond to Reuters’ request for comment.
Additionally, the panel has suggested incorporating blockchain technology at the exchange to facilitate secure and rapid sharing of verifiable information among stakeholders such as miners, traders, buyers, and government entities.
Contrary to utilizing an international index for determining average sale prices, the panel emphasized the potential drawbacks of linking iron ore prices to global benchmarks, citing volatility and potential repercussions on domestic steel industry planning and export competitiveness.
India ranks as the world’s fourth-largest iron ore producer, with a significant portion of its production exported to China. In China, sellers utilize a variety of reference points, including international benchmarks and local indices, for domestic transactions.