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Steel units in Odisha resent high pricing of OMC's iron ore

Besides, the weighted average price adopted by OMC is higher than the market price

Jayajit Dash  |  Bhubaneswar 

Steel

Steel and other end-use industries in Odisha have taken exception to the stubbornly high pricing of for the long-term linkage customers. Pointing to the faulty method of price discovery, the state-based units have sought relief from the steep prices in the form of concession in pricing.

Industries sourcing via e-auctions organised by the state-controlled Odisha Corporation (OMC) have complained that the price determination for long-term linkage customers is based on the discovered price through e-auctions by They have alleged that the discovered price at auctions is unsustainably high and it needs to be eased.

At the latest round of e-auctions conducted by on February 3, prices of lumps were in the band of Rs 2,000-2,200 per tonne. fines prices varied from Rs 1,400-1,600 a tonne. Steel makers like Jindal Steel & Power Ltd and Visa Steel are among the key buyers of from Even has participated at a few auctions to feed the increasing requirement of its Kalinga Nagar steel plant. It is also contemplating procuring from through long-term linkage.

Purushottam Kandoi, president of All Odisha Steel Federation, said, "The state government is dragging its feet on the issue. Despite several rounds of meetings, no decision has been taken yet to arrive at the right method of price discovery at OMC’s e-auctions. The price is determined based on Indian Bureau of Mines' (IBM's) price, which is faulty and unrealistic. As a result, the end-user industries are suffering. prices should be determined at auctions on the basis of demand and supply."

He said that the state-based steel units, especially the ones lacking captive mines, sorely need a concession in pricing to stay competitive.

Uneconomical transport operations in the state are also contributing to the escalating prices. To add to the woes of the end-users, the prevailing embargo on day-time movement of is encouraging the local transport mafia to dictate mineral freight rates. Ore transportation via rail is also not feasible due to short distance of the destination.

Some players have suggested that the needs to ramp up its production and keep to the mandated environment clearance limits. This would help cool prices as more ore would be made available. 

The bulk buyers under long-term linkage have flagged concerns on logistics issues, including availability of rakes close to the railway sidings of

Besides, the weighted average price adopted by is higher than the market price and this needs to be sorted out by

"OMC’s floor price at e-auctions is based on the pricing mechanism adopted by the IBM which is faulty. Pricing mechanism has to be made more realistic and transparent," said a senior official with a steel company.

Though has drawn a road-map for higher output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. had set a target to achieve a production figure of 20 million tonnes (Mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around 6 Mt.

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Steel units in Odisha resent high pricing of OMC's iron ore

Besides, the weighted average price adopted by OMC is higher than the market price

Besides, the weighted average price adopted by OMC is higher than the market price
Steel and other end-use industries in Odisha have taken exception to the stubbornly high pricing of for the long-term linkage customers. Pointing to the faulty method of price discovery, the state-based units have sought relief from the steep prices in the form of concession in pricing.

Industries sourcing via e-auctions organised by the state-controlled Odisha Corporation (OMC) have complained that the price determination for long-term linkage customers is based on the discovered price through e-auctions by They have alleged that the discovered price at auctions is unsustainably high and it needs to be eased.

At the latest round of e-auctions conducted by on February 3, prices of lumps were in the band of Rs 2,000-2,200 per tonne. fines prices varied from Rs 1,400-1,600 a tonne. Steel makers like Jindal Steel & Power Ltd and Visa Steel are among the key buyers of from Even has participated at a few auctions to feed the increasing requirement of its Kalinga Nagar steel plant. It is also contemplating procuring from through long-term linkage.

Purushottam Kandoi, president of All Odisha Steel Federation, said, "The state government is dragging its feet on the issue. Despite several rounds of meetings, no decision has been taken yet to arrive at the right method of price discovery at OMC’s e-auctions. The price is determined based on Indian Bureau of Mines' (IBM's) price, which is faulty and unrealistic. As a result, the end-user industries are suffering. prices should be determined at auctions on the basis of demand and supply."

He said that the state-based steel units, especially the ones lacking captive mines, sorely need a concession in pricing to stay competitive.

Uneconomical transport operations in the state are also contributing to the escalating prices. To add to the woes of the end-users, the prevailing embargo on day-time movement of is encouraging the local transport mafia to dictate mineral freight rates. Ore transportation via rail is also not feasible due to short distance of the destination.

Some players have suggested that the needs to ramp up its production and keep to the mandated environment clearance limits. This would help cool prices as more ore would be made available. 

The bulk buyers under long-term linkage have flagged concerns on logistics issues, including availability of rakes close to the railway sidings of

Besides, the weighted average price adopted by is higher than the market price and this needs to be sorted out by

"OMC’s floor price at e-auctions is based on the pricing mechanism adopted by the IBM which is faulty. Pricing mechanism has to be made more realistic and transparent," said a senior official with a steel company.

Though has drawn a road-map for higher output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. had set a target to achieve a production figure of 20 million tonnes (Mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around 6 Mt.
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Business Standard
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Steel units in Odisha resent high pricing of OMC's iron ore

Besides, the weighted average price adopted by OMC is higher than the market price

Steel and other end-use industries in Odisha have taken exception to the stubbornly high pricing of for the long-term linkage customers. Pointing to the faulty method of price discovery, the state-based units have sought relief from the steep prices in the form of concession in pricing.

Industries sourcing via e-auctions organised by the state-controlled Odisha Corporation (OMC) have complained that the price determination for long-term linkage customers is based on the discovered price through e-auctions by They have alleged that the discovered price at auctions is unsustainably high and it needs to be eased.

At the latest round of e-auctions conducted by on February 3, prices of lumps were in the band of Rs 2,000-2,200 per tonne. fines prices varied from Rs 1,400-1,600 a tonne. Steel makers like Jindal Steel & Power Ltd and Visa Steel are among the key buyers of from Even has participated at a few auctions to feed the increasing requirement of its Kalinga Nagar steel plant. It is also contemplating procuring from through long-term linkage.

Purushottam Kandoi, president of All Odisha Steel Federation, said, "The state government is dragging its feet on the issue. Despite several rounds of meetings, no decision has been taken yet to arrive at the right method of price discovery at OMC’s e-auctions. The price is determined based on Indian Bureau of Mines' (IBM's) price, which is faulty and unrealistic. As a result, the end-user industries are suffering. prices should be determined at auctions on the basis of demand and supply."

He said that the state-based steel units, especially the ones lacking captive mines, sorely need a concession in pricing to stay competitive.

Uneconomical transport operations in the state are also contributing to the escalating prices. To add to the woes of the end-users, the prevailing embargo on day-time movement of is encouraging the local transport mafia to dictate mineral freight rates. Ore transportation via rail is also not feasible due to short distance of the destination.

Some players have suggested that the needs to ramp up its production and keep to the mandated environment clearance limits. This would help cool prices as more ore would be made available. 

The bulk buyers under long-term linkage have flagged concerns on logistics issues, including availability of rakes close to the railway sidings of

Besides, the weighted average price adopted by is higher than the market price and this needs to be sorted out by

"OMC’s floor price at e-auctions is based on the pricing mechanism adopted by the IBM which is faulty. Pricing mechanism has to be made more realistic and transparent," said a senior official with a steel company.

Though has drawn a road-map for higher output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. had set a target to achieve a production figure of 20 million tonnes (Mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around 6 Mt.

image
Business Standard
177 22