OMC sticks to high floor price in iron ore auctions

Company has stuck to its high pricing regime despite repeated pleas by end use industries to slash prices

State controlled miner Odisha Mining Corporation (OMC) refused to budge from its steep floor price of iron ore lumps and fines despite plunging market prices and dousing user industry's expectations of thaw in prices.

The floor prices of lumps and fines (from OMC's Daitari mines) have been kept largely unchanged at Rs 2,200 per tonne and Rs 1500 a tonne respectively. The next round of e-auctions are scheduled on November 9.

OMC has stuck to its high pricing regime despite repeated pleas by end use industries to slash prices in the wake of plunging international ore prices. Its stockpile of iron ore fines and lumps has climbed up to over six million tonne.

"It is expected that OMC acts in the interest of the state and reduces prices of lumps & fines drastically for supporting the end use plants and pellet plants in Odisha. The formula that OMC may consider is cost plus basis as well as enhancing production significantly. The end use plants have been held at ransom by the merchant miners and thus readily move all demand to OMC", said Manish Kharbanda, executive director and group head (mines & minerals), Jindal Steel & Power Ltd (JSPL).

The All Odisha Steel Federation (AOSF) has written to OMC for a correction in floor prices.

"In the current scenario, no steel unit can lift material at the present floor prices announced by OMC and sustain. Most of our member companies have been making losses and amid a depressed market, they will have no other option but to suspend operation and resort to cut manpower", said P L Kandoi, president, AOSF in a letter to Girish S N, managing director, OMC.

Ranjan Mishra, executive director, Visa Steel said, "At a time when prices of finished steel products have plunged by up to Rs 2500 per tonne, the government needs to step in to help steel makers reduce their input cost. This can be done by slashing base price of iron ore offered by OMC at its e-auctions. Else, the operations of steel companies would become unsustainable".

Steep base rates have deterred buyers at earlier rounds of auctions conducted by OMC. At its last e-auctions held on October 8, OMC drew a blank for high grade iron ore offered from its Gandhamardhan mines. OMC had offered 70,000 tonne of 64 Fe grade ore and 20,000 tonne of 65 Fe grade ore. For its Koira mines (64 grade Fe), OMC managed to book only 152,000 tonne out of the offered quantum of 270,000 tonne.

"OMC need to follow the market trend and reduce base prices at its auctions. They cannot stick to high prices when the steel companies are bleeding. The base price for iron ore fines needs to be corrected to Rs 1000 a tonne while that of lumps should be fixed at Rs 1800 per tonne", said Anil Ahuja, executive vice president, Bhushan Steel.

Analysts feel domestic ore producers are not correcting prices despite contrary market trends.

Pukhraj Sethiya, associate director- energy (coal & mining) at PricewaterhouseCoopers said, "Global iron ore prices are still soft while key producers have increased prices by marginal amount in India. With soft steel prices and global supply surplus, Indian steel players are finding it challenging to produce and compete in market. Iron ore prices in India need correction to move in line with global market for Indian steel to remain competitive."

Leading iron ore producer National Mineral Development Corporation (NMDC) has marginally slashed lumps prices by Rs 80-100 per tonne but has hiked fines rates by Rs 100 a tonne. NMDC has pegged rate of lumpy ore at Rs 2400 per tonne and that of fines at Rs 1560 a tonne.