New Deal

Calcutta, Jan. 5: Tata Steel entity Corus has signed a purchase deal for iron ore with Australia’s Northern Iron.

According to the agreement, Corus will buy six million tonnes of iron ore concentrate from the company, which operates a mine in Norway.

The agreement will come into force from April 1, 2009 and remain valid for five years.

During the period, the Anglo-Dutch firm can procure another 2.25mt of the concentrate from the Norway mine.

The price of iron ore will depend on the benchmark prices offered by Brazil’s Vale for similar products delivered to Europe on a free-on-board basis.

This is the second long-term agreement signed by Corus in the last three months.

In October, Tata Steel had signed an agreement with Brazil’s Vale to service Corus’s European facilities. According to the terms of the contract, it would procure 63mt of iron ore over five years beginning 2009.

The contract with Northern Iron comes at a time when the demand for ore is likely to drop because of global recession.

Steel makers have cut production across the globe following a drop in offtake from construction, automobile and consumer durables firms. They have also deferred the delivery of contracted iron ore from miners.

Corus is dependant on the market purchase of iron ore as it does not have its own mine.

It requires about 27mt every year.

The short distance between the Northern Iron mine and Corus’s plants in the UK and the Netherlands will result in lower freight cost.

Australian Stock Exchange-listed Northern Iron, with its headquarter in Perth, was formed to acquire the Sydvaranger iron project in northern Norway.