Steel mills reluctant to buy NMDC ore at Karnataka auctions

Mills stayed out of e-auction held on October 5 for NMDC ore owing to a very high base price fixed by public sector mining giant

Even as the steel mills are facing shortage of raw materials for their blast furnaces, they showed no urgency to buy iron ore at the recent electronic auctions held exclusively for the ore put on auction by the state-owned NMDC Limited.

At the e-auctions held on October 5, 2012 for about 1.14 million tonnes of iron ore produced by NMDC, the buyers showed interest to buy barely 160,000 tonnes, about 14% of the stock.

Major steel producers in Karnataka such as JSW Steel, BMM Ispat, Kalyani Steels and Kirloskar Ferrous Industries are operating their blast furnaces at a very low inventory levels due to delay in resumption of regular mining in the state.

The lack of interest on the part of the buyers was attributed to a very high base price fixed by NMDC. The company had fixed base price in the range of Rs 4,900-5,300 per tonne for lumps with 63-64% Fe grade.

“We have written to the Central Empowered Committee (CEC) to ask NMDC announce a cut in the prices. As far as prices of other iron ore is concerned, the Monitoring Committee has effected 10% reduction after the prices declined in the international market,” an official associated with the e-auctions told Business Standard.

Iron ore fines with 64% Fe grade are auctioned at a base price of Rs 3,030 per tonne, while 65% Fe grade lumps are auctioned at a price band of Rs 5,700-5,800 per tonne. The Monitoring Committee has till now sold 28.6 million tonnes of iron ore through e-auctions, of which 7.4 million tonnes were from NMDC. Another close to 4 million tonnes of iron ore is likely to be auctioned in the next two months.

Meanwhile, NMDC Limited has lowered the domestic iron ore prices by 2-11% for the month of October. Prior to price reduction, NMDC had fixed Rs 6,100 per tonne for lumps and Rs 3,000 per tonne for fines.

“We have reduced the prices for October month and the prices are also reduced for the stock sold through e-auctions in Karnataka,” a senior official of NMDC said.

The board of directors of NMDC at their meeting on October 8, 2012 also decided to fix iron ore prices for domestic consumers on a monthly basis from October, 2012 onwards instead of quarterly basis maintained earlier.