Maharatna PSU Steel Authority of India Ltd. (SAIL) has managed to sell just 196,000 t of iron ore at auctions from its plants in Odisha in Aug’21. This is substantially higher compared to around 30,000 t of sales in Jul when SAIL did not conduct auctions from its mines in Odisha due to administrative reshuffling. However, volumes are still quite subdued compared to 400,000-500,000 t of sales in May-Jun, SteelMint data shows.
Low sales, limited participation
Notably, iron ore sales at auctions in Aug comprised just about 12% of the total quantity of nearly 1.6 mn t offered at auctions. However, iron ore dump fines and tailings comprised over 60% of the total material put under the hammer, which failed to attract bids at successive auctions from the Dalli and Rajhara mines under the Bhilai Steel Plant (BSP) as well as from mines in Odisha.
Low-grade iron ore (Fe 49.68% to around Fe 59%) dump fines and tailings auctions have failed to elicit response thereby compounding problems for SAIL that lacks pelletisation facilities for ore beneficiation. SAIL is believed to be sitting on massive dump fines stockpiles in Jharkhand, Chhattisgarh and elsewhere, which the steelmaker is finding difficult to liquidate.
Incidentally, SAIL’s merchant iron ore sales in Aug were entirely from its mines in Odisha that have now come under the Rourkela Steel Plant (RSP). This has ensured efficient working of the mines and superior coordination with the company’s raw materials management team, SAIL sources divulged.
However, the geographical distance of the mines in Jharkhand from the Bokaro Steel Plant (BSL) is still a pressing concern. In fact, the Jharkhand mines are closer to RSP than BSL.
Pressure on prices
Besides dump fines, participation at auctions for fresh fines witnessed limited interest, as per SteelMint reports. For example, Fe 62.5% grade ore from the company’s flagship Bolani mine in Odisha received bids for just 56,000 t out of the 136,000 t on offer on 9 Aug. The material was sold at INR 8,800/t (including standard royalty, statutory cesses and additional premium due to MMDR Amendment Act, 2021).
Similar grade material from Bolani attracted bids for 16,000 t at an auction held on 31 Aug; the quantity put under the hammer was 136,000 t. Notably, prices at this auction slipped to INR 7,530/t.
The close to INR 1,300/t decrease in prices for similar grade material at SAIL auctions points to the astonishingly fast depreciation in prices and buying interest (at high prices), which largely gels with reduction in iron ore prices in the domestic market.
NMDC has reduced prices for fines and lumps by around INR 1,000/t for Sept’21, after marginal reductions in the two preceding months. OMC auctions in the past couple of months have witnessed dismal bookings due to high prices.
Odisha merchant producers have cut prices too, premised not just on unwillingness of domestic end-users to pay high prices but also the falling exports market due to the sharp decline in global prices.
Iron ore prices have come under pressure not solely due to soft sentiments during the monsoon season; domestic prices need to correct further – given weak global sentiments – for SAIL auctions to garner participation.
However, SAIL expects domestic demand to pick up from Sept onwards. Given strong domestic demand – and expected robust autumn demand in China – prices are less likely to slide further, SteelMint notes.
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