Lukewarm response to OMC iron ore auction

Third online auction of iron ore by Odisha Mining Corporation (OMC) witnessed lacklustre participation of steel firms and other allied industries despite a floor price cut by the state-owned miner.

This time, OMC had offered 158,000 tonne fines and 66,000 tonne sized ore, which work out to total of 224,000 tonne iron ore.  However, there were no takers for fines in the auction and only 33,000 tonnes of sized ore were booked.

For the auction conducted on February 20, OMC had set base price of fines at Rs 2,023 to Rs 2,427 a tonne and Rs 3,237 to Rs 3,318 a tonne for lumps, excluding smaller amount varieties. In the January auction, floor price of fines was Rs 2,380 to Rs 2,856 a tonne while lumps were offered at Rs 3,427 to Rs 4,379 a tonne.

The rate of 60 grade iron ore fines, of which only 5000 tonne was offered for sale, was quoted at Rs 1,333 a tonne. Similarly, 65 grade iron ore fines, of which only 3,000 tonne was available, was priced at Rs 2,955 per tonne.  

The sized ores were booked at floor rate only and no premium was offered by the participants.

“OMC rates are showing exactly opposite trends of global markets. Besides, when finished steel rates are under pressure, who will buy the ore at high price,” said a participant in the auction. In global markets, iron ore rates have come down by more than 10 per cent since January over supply gut and lower demand from China, the major steel producer of the world. In domestic markets, iron ore rates for exports are quoted at around $50 (Rs 3200) per tonne.

OMC officials refused to comment on the fixation of floor price, but privately admitted that the rates must follow the international trend or else they will have to face the grilling of auditing agencies.   These rates will have a bearing upon the rate at which steel firms are provided iron ore through long term linkage scheme.  As per a resolution of the state steel and mines department, half of the minerals produced by merchant miners in the state are to be supplied to the local steel producers who do not possess captive mine, at the rate equivalent to average price of last two online auction rates.

Accordingly, OMC has earmarked 2.5 million tonne iron ore and private miners such as Rungta, Essel Mining, MGM, Serajuddin have agreed to provide 4.2 million tonne ore to local steel units in the Jan-March period of the current fiscal. The state-based steel units which are eligible for linkage include Essar Steel, Brahmani River and Pellets Ltd (BRPL), Jindal Steel and Power Ltd (JSPL), Visa Steel and Bhushan Steel.