State-owned integrated steel producer SAIL has auctioned 812,000 t of iron ore in the open market in Dec’20 – with grades ranging between Fe 58% and Fe 65.79% – from its captive mines in Odisha, Chhattisgarh and Jharkhand, Karnataka under the Raw Materials Division (RMD) of the company.
SteelMint data shows that iron ore sales through periodic auctions conducted by SAIL peaked in Dec’20, exceeding even 712,000 t recorded in Oct’20. Total supply from the company’s Bolani and Barsua mines in Odisha were recorded at 376,000 t in Dec’20 – significantly higher than 144,000 t in Nov’20.
However, additional supplies from SAIL’s mines in Jharkhand – Kiriburu and Meghahatuburu – went some way into boosting the quantum of allotment for auctions as well as total sales. SAIL started supplying iron ore from its Jharkhand mines following a recent Union Ministry of Mines circular relaxing norms relating to the PSU steel giant obtaining mandatory permission from respective state governments before conducting iron ore auctions.
Although SAIL is yet to acquire permission from the Jharkhand government regarding sale of iron ore fines from its captive mines in that state – unlike Odisha and Chhattisgarh governments that have already given the formal go-ahead in this regard – the new government notification states that the company can start conducting iron ore auctions by formally intimating the concerned state government and IBM as taking “permission may take time”.
According to the government notification, the rationale behind tweaking the regulation related to permission was the urgency required to tackle the “supply shortage of iron ore” in the market as well as the potential for SAIL’s captive mines to increase production, according to some estimates by 10-12 mn t by 2021-2022.
Total sales from the two mines in Jharkhand in Dec’20 stood at 288,000 t, as per SteelMint data.
The PSU steel major sold over 2 mn t of iron ore at auctions from Odisha and Chhattisgarh mines till Nov’20 this year. According to SteelMint analysis, aggregate iron ore sales by SAIL, since Feb’20, stands at over 2.94 mn t.
Prices stabilizing slowly
As assessed by SteelMint, the weighted average price for Fe 62.5% iron ore fines from Bolani mine in Odisha was at INR 5,400/t in Dec’20 –slightly lower than INR 5,550/t in Nov’20. Standard Fe 62% iron ore from the company’s Jharkhand mines was assessed by SteelMint at INR 4,800/t.
Although prices are comparatively much higher vis-à-vis Sept’20 and Oct’20, there is an unmistakable trend towards steady stabilization. This is testified by the fact that the gap between the base price and bids at auctions has narrowed considerably, with iron ore getting booked at prices at par with, or only marginally higher than, the set base price at auctions.
However, in the short-term so long as supply tightness persists for scores of downstream users sans captive mines, SAIL can be expected to allocate high iron ore volumes at its periodic auctions.
Check out: Experts Insights on Iron Ore
Iron ore prices are on a roll, with both state-owned miner NMDC as well as merchant miners raising prices more than three-fold in the last six months. Just 11 (eleven) auctioned iron ore mining leases have been able to resume production in Odisha, out of 19 mines till Nov’20, while the pandemic and logistical constraints too have curtailed iron ore production.
How can supply shortfall be plugged? What are challenges faced by the new lessees face in scaling up production? Will new mines go under the hammer in Odisha anytime soon? For expert insights on these pressing issues, register now for SteelMint’s upcoming webinar ‘Maximizing Iron Ore Production from Odisha & Challenges Ahead’ on 07 January, 2021 at 11 am (IST)
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