PSU steel producer Steel Authority of India Ltd. (SAIL) posted robust sales of over 850,000 t of iron ore fines at auctions in Mar’21 – significantly higher compared to a little over 570,000 t in Feb’21. Iron ore mines under SAIL’s Raw Materials Division (RMD) in Odisha, Jharkhand and Karnataka and those under Bhilai Steel Plant in Chhattisgarh produced 22.5 mn t of iron ore in FY21. As per SteelMint data, SAIL has auctioned around 4.7 mn t of iron ore fines between May’20 and Mar’21.
Nearly 700,000 t of iron ore fines went under the hammer from the company’s Bolani and Barsua mines in Odisha in Mar’21, while 80,000 t was allocated from the Rajhara and Dalli mines in Chhattisgarh. The Taldih mine in Odisha supplied another 80,000 t of material for auctions in Mar’21. Notably, Bolani produced 6.24 mn t of iron ore in FY21 – the highest among all SAIL mines.
As per SAIL’s recent disclosure, the steel-maker despatched 22.8 mn t of iron ore in FY21. Chairman Soma Mondal told the media recently that “apart from higher cash collections due to increased steel sales, the company is augmenting cash flows through auctions of iron ore and fines.” Notably, iron ore dumps and tailings form a chunk of the total fines sales at periodic auctions.
The MMDR Amendment Act, 2021 allows government companies to sell up to 50% of total annual iron ore production in the open market after meeting captive requirements and by paying an “additional amount”. The aim is to augment iron ore supplies for downstream users.
Bids rise for high-grade ore
Robust downstream demand triggered strong sales at SAIL auctions in Mar’21, SteelMint notes, with high-grade material attracting high bids at auctions on limited availability.
For instance, 64,000 t of Fe 62.5% fines received bids at INR 4,260-4,280/t (excluding royalty) at SAIL’s Bolani auction on 20 Mar’21. The bids were INR 500/t higher compared to INR 3,810-3,830/t bids received for similar grade material from Bolani mine on 12 Feb’21, SteelMint learnt from sources.
Iron ore prices are staying firm due to paucity of lumps and high-grade ore in the market. SteelMint has reported that some merchant miners have exhausted their annual EC limit in Odisha. However, overall supplies have steadily increased since operationalisation of auctioned leases in the state. In addition, healthy steel margins are supporting iron ore prices: PSU miner NMDC has hiked prices in the beginning of Apr’21 in conjunction with merchant miners.
SteelMint assesses weighted average prices of iron ore (Fe 62.5%) from SAIL’s Bolani mine in Odisha at INR 4,270/t in Mar’21 vis-à-vis INR 3,820/t in Feb’21 – an increase of INR 450/t. However, prices of Fe 60-61% ore from BSP’s Chhattisgarh mines are flat at INR 3,350/t (m-o-m).
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