India's fragmented iron ore mining industry needs to cooperate more in order to compete with global mining companies, as the structure of the market is changing rapidly, an executive at one of India's biggest iron ore miners told the Federation of Indian Mineral Industries (FIMI) iron ore summit in Singapore Tuesday.

"It's not just a question of the global recession, the (iron ore) game itself is changing radically," said K.K. Kumar, vice-president of marketing at Indian mining company MSPL Ltd.

India's traditional role as a swing producer was being threatened by the increasing involvement of global mining companies in the spot iron ore market in China, Kumar said.

"Small and medium-sized (Chinese) steel mills, our traditional market, are being wooed by the big three miners," he said, referring to Rio Tinto PLC (RTP), BHP Billiton Ltd. (BHP)and Vale S.A. (VALE).

India has 250 mines, which exported around 105 million tons of iron ore in the year to March 31, most of it to China.

The global economic slowdown and the consequent reduction in steel production on a global basis has transferred price risk from buyers to suppliers, and the mining industry needs to respond, Kumar said.

"China needs India as much as India needs China in this new environment," he said.

India iron ore exports were a counterweight to the negotiating power of the big three global miners, but to make the best of the situation Indian miners needed to act in unison, he said.

Kumar recommended that Indian miners consider a new pricing formula where a reference price for each grade of Indian ore could be set as a floor, avoiding cut throat competition between Indian miners.

Another option would be to enter into three- or six-month term contracts at fixed prices or volumes, he said.

Until September 2008, Indian iron ore on the spot market traded at a premium to the annual contract prices negotiated by the big global miners with leading Chinese steel mills.

However, the spot iron ore fines price collapsed from $200 a metric ton in mid-2008 to as low as $55/ton earlier this year, well below contracted rates.

The spot price is currently $67.75/ton, which including freight costs is around $7 below the contract price negotiated between Rio Tinto and Japanese and South Korean steel makers, a level which some analysts still believe will act as a benchmark this year.

Kumar also recommended that FIMI establish a representative office in China as an urgent priority, to help Indian miners better market their products and to present a united front to Chinese steel mills, possibly negotiating directly with the China Iron & Steel Association.

Indian miners also need to continue to lobby the government for better rail and port services, as logistics account for 65% of Indian iron ore costs, and reducing this percentage should be a priority, he said.

On June 3, India's Ministry of Railways reduced freight charges on iron ore meant for export by 25% to 30% to help the competitiveness of Indian miners.

 
   -By James Campbell, Dow Jones Newswires; 65-64154-082; james.campbell@dowjones.com