Goa to put 8 mt of unsold iron ore on the block

Buyers may abstain from participation due to high base price, govt to approach Supreme Court for further direction

In a bid to evacuate mine sites to comply with a Supreme Court (SC) directive, the government of Goa is putting nearly eight million tonnes of low-grade iron ore for immediate auction at a price rejected by most buyers in previous auctions.

Of around 16 mt reserved for sale through e-auction, the state government has sold nearly half. The rest was also put for sale at various auctions in the past, but a high base price made it unattractive. Now, the government wants to sell the entire quantity before mining companies re-commence operations, waiting for rationalisation in various levies in the coming Union Budget this Monday.

Selling of all ore stock is a key concern. The SC directive in 2013 empowered the state to do so and companies want mine sites to be cleared for storing new output before they resume. The key concern for both buyers and sellers is the minimum bid price, estimated to be fixed at Rs 500 a tonne, according to a senior official of the department of minerals and geology (DMG).

CAUSE FOR CONCERN

• Of around 16 mt reserved for sale through e-auction, only half has been sold
• High base price makes ore unattractive
• Minimum bid price of Rs 500 a tonne remains a key concern for both buyers and sellers
• Govt to approach SC if ore remains unsold

In the previous two auctions, the government had set the same minimum bid of Rs 500 a tonne for grades between 50 and 62 per cent iron. Despite being the lowest price, half the offered quantity of 2.37 mt was unsold. This meant beneficiation units and steel mills did not find viable the lifting of low grade ore at even this price.

In the coming auction, too, it is unlikely that such a large quantity will be sold. However, “we cannot reduce the price further. If ore remains unsold, we will approach the SC for further direction,” said the DMG official.

Haresh Melwani, chief executive at H L Nathurmal & Co, a miner and exporter, sees some value in this ore for beneficiation plants only after a sharp revival in the price in global markets. While ore prices have surged around 16 per cent to $48 a tonne in February, some more rise is required before Indian traders can begin shipping beneficiated ore.

Sources said Indian traders had exported around three mt, largely to China, in recent months despite a subdued trend in global steel markets. Traders are yet to lift 4.5–5 mt from mine sites which they’d bought in auctions. The primary reason is falling ore prices in global markets, after a sharp decline in demand from steel mills and closure of loss-making steel manufacturing units in China.

“It is important to clear existing stocks before resuming fresh production, for which traders await cuts in various levies by the state and Centre,” said S Shridhar, executive director, Goa Mineral Ore Exporters Association.