Price of iron ore fines jumps by 17%, lumps by 11% as steel prices soften

The price of iron ore, excluding that in Karnataka, have jumped by 17 per cent for fines and 11 per cent for lumps in this financial year (starting April 1), in contrast to a five per cent slide in steel (TMT bar) prices in the same period.

With construction activity hit by the ongoing monsoon and a global trade war threatening to create a glut in the domestic market, the steel industry is keeping its fingers crossed. Any further rise in home iron ore prices could impact their margins.

Ore prices have risen after a minor dip in April and May. In July, the price of 62.5 per cent Fe (iron content) fines rose from Rs 2,100 a tonne to Rs 2,400. Lump prices rose from Rs 4,925 to Rs 5,175 a tonne. Year-on-year, the rate for fines is up 113 per cent; lumps by 97 per cent. The rise in these four months of 2018-19 has been 11 per cent for lumps and 17 per cent for fines.

In contrast, faced with muted demand growth, steel prices have fallen from Rs 41,000 a tonne to Rs 39,000 a tonne, down five per cent, in the same period.

What has helped mining companies to consistently raise iron ore price over the past one year is sustained demand from the seel industry and an ensuing gap in supply of this key raw material. In 2017-18, production of steel was 102 million tonnes (mt), from an installed capacity of 134 mt a year -- 76 per cent utilisation. The requirement of iron ore was 167 mt, calculated at 62 per cent Fe content. However, domestic supply of this grade of ore was about 127 mt, of a total of 210 mt production of all grades.