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Sesa Goa rides on price hike hopes

Sesa Goa, the only pure iron ore counter, reacted positively to the news of the first global price hike signal for the next fiscal on Friday. The iron ore exporter finished up 12.53 per cent at 1391.70 with a traded volume of over 5 lakh shares on the BSE alone.

Brazil's CVRD, the world's biggest iron ore producer, struck an early agreement with Chinese steel mills for the 9.5 per cent upward benchmark (iron ore fines) price revision for 2007-08 (April-March). The deal for the first time in the last 10 years bypassed the traditional steel powers, Japan and Europe, as also other ore majors such as Rio Tinto and BHP. The 2006-07 benchmark price negotiations between suppliers and buyers did not conclude until May and the 19 per cent revision had to take retrospective effect from contract start date on April 1, 2006 after the European and Japanese buyers blinked first.

Dalal Street assumption was that Sesa Goa, which exports to steel manufacturers in China, Europe and Japan, would improve export earnings in the next fiscal riding on price trend. It is also expected that the price revision for lump iron ore will increase as much as fines.

Mr P.K. Mukherjee, Director-Finance of Sesa Goa, told Business Line that going by the broad trend, the 9.5 per cent hike was likely to hold for the next financial year for all exporters of fines and lumps and the raw material importing steel plants world over. "The three years' experience showed that one exporter strikes a deal first, which is more or less followed by the rest." Industry insiders, however, said that expectation (among the ore market players) was of a double-digit mark-up but less than last years' hike. Export price rise of 9.5 per cent would obviously be positive for Sesa Goa, Mr Mukherjee added. The ore price had increased by 18 per cent in 2004-05 and a record hike of 71 per cent was extracted by the exporters from steel makers for 2005-06.

Jayanta Mallick

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