- Response to OMC’s fines May auction weak
- Trade activity declines this week in Odisha
Iron ore prices in Odisha continued to face downward pressure as a tepid response to the recent Odisha Mining Corporation (OMC) auction dampened market sentiments. The auction saw limited participation, particularly for iron ore fines, indicating weak buying interest from steelmakers and sponge manufacturers.
BigMint’s Odisha iron ore fines (Fe 62%) index remained stable w-o-w at INR 5,100/t ($60/t) ex-mines on 24 May. Notably, deals of around 200,000 t of iron ore (fines and lumps) were recorded by BigMint in Odisha, which were concluded at lower, discounted prices this week.
Following the auction, several merchant miners attempted to adjust their offers. However, inquiries remained sluggish as buyers avoided fresh purchases due to the recent decline in pellet and sponge iron prices. A trader commented, “The sentiment in the market is cautious. Buyers are withholding from procurement in anticipation of a price correction.”
OMC conducted an auction for 2.353 mnt of iron ore (1.025 mnt of lumps and 1.328 mnt of fines) on 19 May. Around 0.51 mnt (38%) of fines (Fe 55-65%) from different lots were booked at the base prices within the range of INR 4,100-5,500/t ex-mines, while 1.017 mnt (99%) were booked at INR 5,500-8,150/t, with premiums of 2-17% over the base prices. Bids (weighted average) dropped by INR 100/t m-o-m, but lumps bids remained stable. The miner reduced base prices by INR 50-100/t ($0.5-1/t) and INR 450/t ($5/t) m-o-m for fines and lumps, respectively.
Market participants noted this cautious stance due to the deteriorating prices in the pellet and semi-finished steel segment, especially in the central-eastern regions. This has further impacted iron ore demand as steel producers delay raw material procurement.
A miner informed, “We are maintaining our current prices levels but offering discounts to regular buyers to stimulate interest. The demand, especially for higher-grade fines, remains subdued.”
Meanwhile, a few miners are analysing the current market dynamics and have not opened their offers in the market. Trade activity remained dull this week as prominent buyers remained cautious about putting in new iron ore orders.
Despite the overall bearish outlook, a few buyers have started restocking in small quantities ahead of the monsoon, expecting logistical challenges to push prices upward in the coming weeks. However, this restocking is not significant enough to reverse the overall trend.
Market participants noted that iron ore prices in Odisha are likely to remain under pressure in the near term, with limited buying interest and weak downstream market sentiment. They are closely watching for further price adjustments before committing to new purchases.
Factors affecting iron ore prices
- Pellet offers fall w-o-w: Pellet (6-20 mm, Fe 62.5%) prices in Odisha’s Barbil fell by INR 50/t ($0.5/t) w-o-w to INR 8,050/t ($95/t) loaded to wagon. Pellet (Fe 62.5%, 6-20 mm) prices in Durgapur dropped by INR 400/t ($5/t) w-o-w to INR 8,600/t ($101/t) exw on 23 May.
- Sponge iron prices drop w-o-w: According to BigMint’s assessment, sponge iron C-DRI (FeM 80%) prices in Rourkela fell by INR 200/t ($2.5/t) w-o-w to INR 25,100/t ($295/t) on 24 May. Meanwhile, steel billet (100*100 mm) offers in Rourkela dropped by INR 300/t ($4/t) w-o-w to INR 38,800/t ($456/t) today.
Rationale
- T1- Five (5) deals for Fe62% fines were recorded in the publishing window, and three (3) were considered for price computation and given 50% weightage for index calculation.
- T2 – BigMint received nineteen (19) offers and indicative prices under the T2 category (offers, indicative, and bids) in this publishing window. Seventeen (17) were taken into consideration and given 50% weightage. To check BigMint’s iron ore assessment, pricing methodology, and specification document, click here.
Outlook
According to BigMint’s analysis, iron ore prices will remain volatile. The market may get further clarity next week as miners will come up with their revised offers. Trade activity may remain slow in the near term.
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