India: Short to medium term iron ore supplies to remain constrained in Odisha

Iron ore prices in Odisha are expected to remain high in Jun-Aug ’21. This is primarily due to the present scarcity being felt in the merchant market and also the monsoon, which has arrived in large parts of the country, is a big price influencer. Traditionally, in July to Aug period, the overall production recedes by around 10 to 20%.

Lumps are scarce now compared to fines and therefore their prices have touched new highs recently.

SteelMint’s weekly iron ore fines (Fe 62%) index was reported at INR 9,150/t and lumps (5-18mm, Fe 63%) index at INR 14,350/t, ex-mines, on Saturday.

Fig in mn t
Source: SteelMint Research

Factors causing scarcity

• The non-auctioned merchant mining leases do not have adequate levels of iron ore reserves, thus adding to the scarcity.
• Although the Odisha High Court had allowed Sarda Mines Private Ltd (a regular supplier to Jindal Steel and Power) to continue production from its Thakurani B block in Odisha, the state government is still weighing options whether to allow operations or approach the higher court. Meanwhile, production and dispatches remain suspended from the mine. JSPL has been seen actively buying iron ore from the merchant market.
• AM/NS India had been planning to start merchant sales of iron ore lumps from its Thakurani mine. However, a recent government order, valid till 31 Jul, has stopped it from doing so, according to sources. In addition mining has also not yet commenced from its Ghoraburhani mine.
• Odisha miners have been facing stacking diktats from the government which involve use of GPS and other technologies, which is creating further delays in dispatches.
• It has also been heard that a leading miner has not been honouring its merchant orders from sponge iron makers and was refunding the money.

Prices touch record high

As a consequent to this scarcity, prices are already at all-time highs, having been on an uptrend since end of May. As per SteelMint data, Odisha’s iron ore lumps (5-18mm) of Fe63% touched INR 14,350/tonne on 12 Jun, having steadily risen from around INR 12,500/t in end-May. Compared to that, fines of the same grade were at around INR 9,450/t.

Iron ore lumps prices hit record highs in recent OMC auction with bids reaching INR 13,000/t.

Limited takers

The sponge iron mills, highly dependent on the merchant ore, are not procuring at such high prices either. As one source said, the sponge iron players prefer to buy pellets at INR 15,500/tonne but not lumps. Lumps are not viable along with freight charges and long delivery time of around one month from mine to plant, depending on the allotment of rakes from the Railways.