Aggressive bids for iron ore plots at Paradip port may dent exports

Aggressive bidding in response to the recent round of auctioning of mechanical and manual plots for iron ore and iron ore pellets at Paradip port is likely to cast a shadow on export of the commodity, industry experts feel.

Iron ore traffic has witnessed a rebound in this fiscal from the major port, helping it to log 18 per cent growth by the end of December. Iron ore exports from the country touched 18 million tonne in calendar 2016, a six-fold rise over the previous year. Pellet exports also moved up sharply from 0.8 million tonne in 2015 to 5.7 million tonne in 2016.

At the latest round of auctions, the highest bid submitted for iron ore plots is Rs 1258 per sq metre, 70 times higher than the bid of Rs 17 per sq metre in April 2016. This massive increase in price of the plots is going to have a bearing on exports of iron ore and pellets given the volatile nature of global iron ore trade.

While the success at the auctions may have enthused the authorities of Paradip Port Trust (PPT), the rates for the iron ore plots are unsustainable and would especially impact the export business.

“Earning more money is fine but doing so putting development and future of industrialisation of the state at stake cannot be considered prudent by any measure”, said B S Pani, an industry expert.

The rate of Rs 1258 per sq metre for 5000 sq metre plot for 11 months would mean immediate cash impact of around Rs seven crore. The minimum guaranteed traffic for this auction was around 0.18 million tonne over 11 months which would mean an impact of around Rs 380 per tonne. Considering that international iron ore market is very volatile, these rates are not sustainable. This, in the future may jeopardise exports if global iron ore prices start plunging.

A PPT official, however, said, the aggressive bid will not have any bearing on export business of iron ore.

“This is the normal bidding process. The price has been quoted by the bidders and the port authorities have no role in the process. We don't think this will have any impact on the export of iron ore”, he said.