OMC slashes iron ore rates by 18% on weak cues

The Odisha Mining Corporation (OMC) has cut the price of sized iron ore for the July-September quarter by 18 per cent, following weak global cues and sluggish demand for sponge iron and pig iron, trade sources said.

Sized ore having 62 per cent iron content is sold at Rs 4,151 a tonne at Koira mining circles, lower than Rs 5,050 a tonne priced in the April-June period. Iron ore of 65 grade is fixed at Rs 5,151 a tonne, against Rs 6,200 per tonne set by the state-run miner.

All the rates are ex-mine basis and include royalty. The ex-mine value refers to the value of the mineral once it is mined and brought to the surface. The ore produced in the Koira region is primarily used for sponge iron making. OMC sells about 500,000 tonnes of ore every quarter from the region.

For the current quarter, OMC has slashed iron ore rates of the Barbil and Gandhamardana sector by as much as Rs 300 a tonne to Rs 3,701 a tonne. These ores can be directly used in blast furnaces and is used in producing pig iron.

OMC announces iron ore prices every quarter by auctioning a fraction of the total salable quantity every quarter and declares the benchmark rate after arriving at average price. The bids for price setting tender was invited on June 29 . Of 76,100 tonnes offered this time, ore from the Koira region was about 40,000 tonnes.

According to participants, weak price trends of sponge and pig iron affected the rates this time.

Sponge iron rates have tumbled by Rs 1,000 within a month to trade at Rs 17,000 a  tonne at Rourkela, the main hub. Similarly, pig iron fell by Rs 800 a tonne from its June prices to trade at Rs 23,000 in July.

“There is limited demand from buyers these days for iron ore because of poor  response for finished steel prices. Large steel plants are facing difficulties in selling finished products and have reported increase in inventory,” said an official of a local sponge iron plant.

These sponge and pig iron plants sell these intermediate steel goods to large steel plants who have capacity to produce finished steel. In absence of large scale demand in India, some of the steel plants are planing to raise export of finished steels, he said.

Iron ore sold by private miners have also come down coinciding with global cues. Recently private miners Essel Mining and Rungta slashed pig iron grade iron ore by Rs 300 a tonne owing to sluggish demand and weakness in international iron ore prices.

Average global iron ore rates have slipped by more than 15% between April and June to trade at $114 per tonne at Chinese ports tracking bearish trends in overall commodities.