Odisha chrome ore rates jump on supply worries

The price of high-grade chrome ore was up 22 per cent in the online auction done late last month by Odisha Mining Corporation over the level a month before.

The reason, say traders, was limited supply from private companies and a rise in base rate prices. About 98 per cent of the country’s chrome deposits are in Odisha and OMC, owned by the state government, is a major merchant seller, producing a third of the output.

During the auction in the third week of May, the 54-grade ore was quoted at Rs 14,524 a tonne, up from Rs 11,879 a tonne in the previous round. Those of the 52-54 grade ore, the second-most sought grade, rose to Rs 13,442 a tonne, higher than the Rs 11,443 a tonne in the April auction for state-based buyers.

OMC sells chrome ore to local and outside-Odisha buyers in separate auction processes; a little over 70 per cent of the volume is reserved for state-based buyers. As a result, the rates  for local buyers always remain lower than those for outside buyers, due to the higher supply and less participants.

In the recent auction, the price gap between local and outside buyers narrowed significantly. “One reason why prices shot up was because OMC hiked base rates for local buyers by nearly Rs 2,000, to Rs 12,000 a tonne for high-grade ore,” said a trader.

Outside buyers also paid the same price as local ones for 54-grade ore. For the 52-54 grade, these were Rs 13,486 a tonne, compared with Rs 13,442 quoted by local buyers.

OMC had put 55,000 tonnes of friable chrome ore for auction this time, with 38,500 tonnes reserved for local players. Though there was no significant changes in auction volume, traders said, supply worries from private entities influenced the rates.

Some private companies have captive mines, such as Tata Steel, Indian Metals and Ferro Alloys, Facor and Balasore Alloys. The state’s directorate of mines had asked Tata Steel to shut its Sukhinda chromite ore mines, citing a Supreme Court order.

The top court had said all operating mines without a valid lease deed after 20 years of first renewal must halt production. Though the order was limited to iron ore and manganese mines, the state government also directed a halt to operations in Sukhinda,  running on provisional clearances till May 16. This mine has a capacity to produce 2.4 million tonnes of chrome ore a year.

Chrome ore is used in the production of ferrochrome, which is blended with hot iron metal to make stainless steel. Tata Steel has entered into conversion agreements with some players to produce ferrochrome for export and sale in the domestic market.

Traders said, anticipating drop in supply from Tata Steel mines, the rates have shot up.

"That may be one of the reasons. But the rise in base rate also pushed the auction rates," said an official of Nava Bharat Ventures, which has conversion agreement with Tata Steel.

However, the company said, it has not taken any decision as of yet to take part in the forthcoming chrome ore auction due to supply problem from Sukinda mines of Tata Steel. Neither did it take part in the May auction of OMC.