Beleaguered steel firms see ground for 35% cut in iron ore prices

Prices of finished steel products tumble 10-25% since January

Domestic steel makers see scope for a downward revision in iron ore prices by 30-35 per cent. International prices of benchmark 62 Fe fines falling 23 per cent over the past couple of weeks and finished steel product prices tumbling by 10-25 per cent between January and August back the case for ore price correction in the Indian market, they reasoned.

“Continuing high prices of iron ore is putting further pressure on steel industry and many manufacturers have already started throttling their production. The market is apprehending further deterioration in the situation and many plants may shut down unless immediate attention is given by the government to ensure higher demand in steel and lowering of iron ore prices,” said  Manish Kharbanda, president at Pellet Manufacturers Association of India (PMAI).

Since January 2019, sponge iron ore prices have shed 21-25 per cent, from Rs 21,200 a tonne to Rs 15,800-16,700. TMT bars (12 mm) too have seen a price fall of 14-19 per cent in the comparable period to Rs 28,500-32,600, from Rs 35,400-37,900. The slide has also been noticed in steel billets, with prices correcting by 20-21 per cent from Rs 31,600-31,950 per tonne to Rs 25,300-25,400.

International iron ore prices, after hitting a five-year high of $121 have mellowed to $93 (on August 12) as supplies from Brazil have stabilised sooner than expected. Spot prices are faced with a downside with easing of supply turmoil, lacklustre steel demand outlook and Chinese steel mills loath to book additional shipments.

But domestic iron ore has not seen the desired correction even as global prices go into a downward spiral with forecast of further easing. For instance, in Odisha, the largest iron ore producer, prices (ex-mine) of 62 per cent Fe fines have hovered around Rs 2,500 a tonne with sporadic marginal cuts. Both merchant miners of Odisha and NMDC have retained status quo on prices despite a glut in domestic market and steel producers disquieted by continuous fall in product prices since January. 

Jindal Steel & Power Ltd (JSPL), a top producer has urged Odisha Mining Corporation (OMC) to cut prices by 30-35 per cent and accord priority to state-based integrated steel makers and other end-use industries.

“OMC is requested to declare all material that is available so that the supply side remains firm, and realistic rates are realised. These prices will have a cascading impact on other merchant miners who would then be forced to reduce prices for supporting the end use industry in Odisha”, JSPL said in a letter to OMC.

JSPL has invested Rs 43,000 crore on a six-million-tonne-per-annum (mtpa) integrated steel mill at Angul and a nine-mtpa pellet complex at Barbil. The steel maker is financially stressed as escalating input costs and subdued demand weigh on its operations. The Naveen Jindal-led firm is sourcing iron ore from OMC via long-term linkage and also buying at the electronic auctions.