High floor price deters buyers at OMC iron ore auctions

The latest round of iron ore e-auctions by Odisha Mining Corporation (OMC) saw subdued buying interest. OMC offered 508,000 tonne of iron ore of which barely 200,000 tonne was booked, meaning an unsold inventory of 308,000 tonne.

Both iron ore lumps and fines were on offer from OMC's key operating mines of Gandhmardhan, Daitari and Koira. 

The response to the auctions was weak as OMC continued its stand to hike base prices of lumps and fines. The floor price of lumpy ore was in the range of Rs 2200-2600 per tonne. Similarly, fines’ reserve price was fixed in the band of Rs 900-1300 a tonne. The raise in floor prices by OMC was despite plunge in sponge iron prices of the order of Rs 2500-Rs 3000 per tonne since the last auctions.

"OMC’s floor price at iron ore e-auctions is based on the pricing mechanism adopted by the Indian Bureau of Mines (IBM) which is faulty. Pricing mechanism has to be made more realistic and transparent,” said a senior official with a steel company.

OMC has refused to budge from its pricing stand, ignoring concerns flagged off by steel makers. R Vineel Krishna, managing director, OMC could not be immediately contacted for his comments.

Though OMC has drawn a roadmap for higher iron ore output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. OMC had set a target to achieve a production figure of 20 million tonne (mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around six million tonne.