India: Iron ore prices exhibit divergent trends in Karnataka

• High-grade ore gains as buyers face supply constraints
• NMDC Kumaraswamy auction eyed for price direction

Karnataka iron ore prices remained largely firm during the assessment period, supported by stronger sponge iron and downstream steel market sentiments. However, a clear divergence was observed across grades, with high-grade ore witnessing strong demand amid tight availability, while low-grade material continued to face weak buying interest despite ample availability.

According to BigMint’s latest assessment, Fe 57% iron ore fines prices declined by INR 50/t ($0.5/t) w-o-w to INR 2,650/t ($28/t) ex-mines, amid sluggish demand and weak buying interest. Market participants noted that low-grade material continued to struggle for buyers, with only a few consumers actively procuring it. Despite the weak demand, prices remained relatively stable as sellers showed limited scope for further reductions.

In contrast, Fe 62% fines prices increased by INR 150/t ($1.5/t) w-o-w to INR 5,400/t ($56/t) ex-mines, supported by tight availability and strong demand for higher-grade ore. Market sources indicated that only a limited number of miners are currently offering high-grade material, while some producers that previously supplied higher grades have shifted towards lower-grade production. As a result, buyers are increasingly dependent on one or two suppliers for high-grade requirements, strengthening sellers’ bargaining power.

Auction activity remained subdued during the week, with only a few auctions scheduled. Lower-grade lots continued to receive a weak response, with less than half of the offered quantities getting booked in some auctions, highlighting buyers’ reluctance to accumulate low-grade material despite improved downstream market sentiments. Buyers are largely preferring direct purchases for high-grade material, where availability remains constrained.

A Bellary-based seller told BigMint, “We have increased our offers for high-grade material, and the material is getting fully sold. Buyers are currently preferring direct purchases rather than participating in auctions.”

A buyer said, “Sponge iron prices are increasing along with coal costs, although margins remain limited. Higher-grade iron ore prices are also moving up due to strong demand.”

Another buyer said, “We are keen to buy higher-grade material, but very few suppliers have it. Even those having higher grades are increasingly offering lower-grade material, so scarcity of high-grade ore is significant.”

Meanwhile, some buyers who had procured material earlier are currently consuming their existing inventory and remain cautious about fresh purchases at elevated price levels. Market participants are closely tracking NMDC’s Kumaraswamy auction for further price clarity, particularly on the high-grade segment.

Rationale

• One (1) trade via e-auction was recorded for Fe 57% in this publishing window and was taken into consideration. Hence, the T1 trade category was accorded 50% weightage.
• Eleven (11) offers and indicative prices were reported, out of which nine (9) were considered as T2. These were accorded 50% weightage.

Influencing factors

• Bellary C-DRI prices rise sharply on tight availability: Bellary lump-based sponge iron (C-DRI) prices increased by INR 1,500/t ($16/t) w-o-w to INR 32,300/t ($336/t), supported by limited material availability and higher input costs. Despite the sharp price rise, buying interest from steel mills remained relatively steady, allowing sellers to maintain firmer offers. The increase in sponge iron prices is providing underlying support to iron ore, particularly high-grade material, although buyers remain cautious at elevated levels.
• Imported coal prices remain elevated: South African thermal coal prices at Indian ports strengthened further as of 1 October, supported by higher international replacement costs, limited port availability and firm demand. Ex-Paradip RB2 (5,500 NAR) increased by INR 600/t w-o-w to INR 14,100/t, while RB3 (4,800 NAR) rose by INR 600/t to INR 12,100/t. At Vizag, RB2 increased by INR 600/t to INR 14,000/t, while RB3 gained INR 500/t to INR 12,000/t. Higher coal costs are keeping sponge iron production costs elevated and, in turn, providing support to iron ore prices.

Karnataka iron ore sales scenario (25 September-1 October 2026)

Outlook

Karnataka’s iron ore market is expected to remain grade-divergent in the near term. Low-grade prices may remain rangebound amid ample availability and weak buyer interest, while high-grade prices are likely to remain supported by tight supply and strong demand. However, any correction in sponge iron prices could limit further upside in iron ore. Market participants are closely watching NMDC’s Kumaraswamy auction for fresh price direction and clarity on high-grade ore values.