PSU miner NMDC has cut iron ore prices sharply by INR 200-870/t for Dec’21 deliveries, SteelMint learnt from sources. Lumps prices have witnessed a comparatively sharper correction than fines. After today’s price cut, the miner’s lump offers have hit an eight-month low.
Competitive pellet offers, dull response at recent auctions, and declining prices in Odisha resulted in lowering of offers. The revised offers are as follows:
Factors behind the price drop?
- Sourcing from NMDC Chhattisgarh drops: Notably, iron ore lump prices are under pressure as pellet offers have become competitive for sponge iron producers due to a sharp decline in domestic pellet prices across markets. NMDC’s total rake movements dropped to 334 in November (till 26 Nov’21) versus 385 in October, as per SteelMint data.
SteelMint learnt from market sources that Chhattisgarh-based sponge producers have reduced sourcing from NMDC too. Although sourcing of iron ore-laden rakes from NMDC by Chhattisgarh-based units has inched up to 78 in November from 63 in the preceding month, many mid- and small-scale producers have scaled down iron ore sourcing.
- Competitive pellet offers impact lump prices: Domestic pellet prices slipped due to weakening sponge iron prices, following the sharp drop in coal import prices over the last one-and-a half months as well as deteriorating exports sentiments.
Sponge iron producers are likely to increase sourcing of pellets owing to a sharp fall in prices, which is simultaneously pressuring iron ore lump prices. This is because sponge iron producers have the option of switching to pellet-based DRI production instead of iron ore-based DRI, depending on price swings in the market.
- NMDC auctions receive tepid response: NMDC had scheduled two iron ore auctions from Chhattisgarh on 29 Nov’21. The first was for 222,600 t of Fe 64%-67% grade material from the Bacheli mines, while the second was for 75,600 t of Fe 64%-65.5% grade ore from the Kirandul mines. The material offered was DR- CLO, Baila lumps, fines, and ROM. However, according to sources, the auctions failed to elicit any response.
- Imports spurt on falling global prices: Rapid decline in global prices in early November led to enquiries multiplying from Indian mills. More than 220,000 t of cargoes are set to arrive at ports in western India in the first week of December alone. Naturally, therefore, domestic prices are not finding any support whatsoever.
- Fall in Odisha iron ore prices: SteelMint’s weekly Odisha iron ore fines and lumps indices fell by INR 200- 400/t w-o-w last week. Miners like Essel Mining and JSW Steel had slashed offers last week amid subdued buying. The Fe 62% fines index was recorded at INR 5,200/t ex-mines, including royalty, DMF and NMET, lower by INR 1,000/t m-o-m.
Outlook
Raipur-based sponge players had put their bookings on hold last week amid expected price revision by NMDC. With a sharp cut in lumps prices, it is expected that they may resume booking. State-run Odisha Mining Corporation (OMC) has scheduled an iron ore fines and lumps auction on 3 Dec’21. The market is also awaiting the outcome of OMC’s auction, for a clearer outlook.
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