India: Odisha iron ore fines index falls further on easing supplies, falling pellet offers

SteelMint’s weekly Odisha iron ore fines (Fe 62%) index decreased by INR 100/t to INR 3,500/t ex-mines (including royalty, DMF & NMET). Buying interest improved in the recent auctions conducted, however, prices have come under pressure on improved production and the drop in pellets, sponge iron prices.

Rationale:

• T1- One deal was reported this week and was, therefore, taken into consideration for the index calculation and given 50% weightage. 110,600t of Fe 62% fines was booked at JSW Steel’s auction at INR 3,510/t ex-mines on 3 November.
• T2- SteelMint received eleven (11) offers and indicative prices under T2 trade deals in this publishing window out of which eight (08) were taken into consideration and given 50% weightage. To check SteelMint’s iron ore assessment, pricing methodology, and specification documents Click here.

Odisha prices:

Reasons behind the drop in index-

• Drop in pellet offers: SteelMint’s bi-weekly domestic pellet (Fe 63%) index, PELLEX, stood at INR 7,800/t, down by INR 200/t compared to last week’s assessment on 28 October due to declining demand from sponge iron players.
• Fall in sponge iron prices: SteelMint’s daily sponge iron, CDRI index, was assessed at INR 32,650/tonne (t) (- INR 350) exw-Rourkela on 4 November. On weekly basis, prices have come down by INR 800/t.
• Easing iron ore supplies: Although it was initially assumed that iron ore production would drop by around 20 mnt this fiscal from Odisha, production has picked up of late. There is a trail of just 3 mnt in iron ore production at this time of the year, which was 83 mnt last year and stands at 80 mnt this year. So, the production guidance stands roughly at around 140 mnt, similar to last year, U.C. Jena, Additional Director of Mines, Govt. of Odisha, informed SteelMint recently.

Chandrapur-based miner cuts lump offers – A Chandrapur, Maharashtra-based iron ore miner has offered iron ore lumps (5-18mm, Fe 63%) at INR 7,200-7,300/t FOR Raipur and fines (Fe 63%) at around INR 3,700-3,800/t FOR Ballarshah. Lump ore offers have come down by INR 500/t. Recently, the miner concluded deals for around 50,000 t of lumps for Raipur and around 20,000 t in the local Chandrapur market at INR 6,700-6,800/t.

Bids remain flat in recent Karnataka auctions: NMDC  booked around 156,000 t fines at the base price of INR 1,789-2,273/t and 106,000 t of lumps at around INR 1,904-2,762/t against the base price of INR 1,904-2,742 in its auction on 29 October. Vedanta conducted an auction on 2 November for 80,000 t of iron ore fines (Fe57.5%) from the A. Narrain mines in Karnataka’s Chitradurga district. According to market sources, the entire quantity was booked at the base price of INR 1,325/t. Prices exclude royalty, DMF and NMET.

Outlook: Market uncertainty and weak buying interest are likely to keep Odisha iron ore prices under pressure. Market sources are awaiting NMDC’s iron ore price revision, which is expected next week.