Odisha based sponge iron manufacturers have recently urged state owned miner – Odisha Mining Corporation (OMC) to review their pricing mechanism in the conducted e-auctions and also for the long term buyers.
As per the sponge makers in Odisha, the sponge makers are bound to pay prices higher than the market price of ore due to inappropriate price mechanism followed by OMC. According to them, the base price of the material is not aligned to the market prices and is instead higher or lower than the market price.
In the previous OMC auction held on 4th Apr’19, out of the total 397,000 MT iron ore lump offered, around 74% (295,000 MT) was booked while remaining was unsold at the base price so quoted. Entire quantity offered from Daitari mines was booked, 80% from Koira mines and only around 56% from Gandhamardhan mines.
Base price comparison of OMC iron ore E-auctions-:
| Mines | Size (mm) | Fe (%) | Base Price as on 01 Feb’19 | Bid Price as on 01 Feb’19 | Base Price as on 04 Apr’19 | Bid Price as on 04 Apr’19 | Quantity Offered (MT) | Quantity Sold (MT) |
| Gandhamardan | 10-40 | 62% | 3,050 | 3,050 | 2,850 | 2,850 | 135,000 | 70,000 |
| 10-180 | 65% | 2,350 | 2,350 | 2,150 | 2,150 | 15,000 | 15,000 | |
| Kurmitar (Koira) | 10-40 | 62% | 3,550 | 3,550 | 3,350 | 3,350 | 180,000 | 143,000 |
| Daitari | 10-40 | 62% | 3,450 | 3,600 | 3,250 | 3,250 | 67,000 | 67,000 |
| Total | 397,000 | 295,000 | ||||||
Base prices in INR/MT on ex-mines basis; including royalty
Source: SteelMint Research
The sponge makers bearing long term agreement with OMC are bound to pay prices at which the auction material is also not being sold completely, i.e the sponge makers are incurring losses due to artificial high prices, on account of prices being higher than market prices.
On similar grounds, the Odisha Sponge Iron Manufacturer’s Association has put down a request to OMC to amend the pricing policy to make it commercially viable for the buyers. The association has suggested formulating a policy similar to that of Coal India Ltd., wherein a base price is fixed on the bases of cost plus reasonable profit, enabling buyers to purchase raw material at viable prices.
OMC is also a key iron ore supplier to steel plants and supplies ore either via e-auctions or long-term pacts.
SteelMint in talk with a senior company official learned that OMC is planning to achieve 20 MnT iron ore output by FY 21. In FY19, OMC’s iron ore output stood at around 11 MnT and we expect an increase in production from Gandhamardhan and Barbil mines in coming years, he shared.
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