Odisha based ferro chrome producers have once again demanded reduction of floor price of OMC chrome ore and concentrates in view of fall in domestic ferro chrome prices. The ferro chrome producers under the banner of Kalinga Nagar Industries Association (KNIA) have written to the Managing Director, OMC Mr. Girish S.N. to reduce floor price in the upcoming chrome ore e-auction.
In the last e-auction held in October, OMC managed to sell only 6,900 MT of chrome ore out of the offered 22,000 MT owing to higher base price.
In the letter they have requested OMC to follow a mechanism of determining the market price of friable ore based on either the prevailing export FOB price of friable/concentrate ore adjusted for local transportation or by back calculating and deriving at a price based on the prevailing domestic ferro chrome price.
“On one hand there has been a fall in domestic ferro chrome prices but the chrome ore prices have not fallen in line with the fall in Alloy price. Domestic prices of ferro chrome have fallen from INR 69,625/MT in November 2014 to INR 60,000 /MT in October 2015, but floor price prices of chrome ore and concentrate offered by state-miner OMC, has instead increased from INR 9,649/MT to INR 10,325 which have aggravated the losses of the ferro chrome industry. Considering the fall in Domestic ferro chrome prices from INR 69,625/MT to INR 60,000/ MT, OMC should have correspondingly reduced the floor price by at least INR 3,000 MT” the letter said.
On the other hand, the international prices of chrome ore have fallen significantly, but public and private miners in India have not dropped the chrome ore price correspondingly. Since the first e-auction of chrome concentrate in November 2014, the International price of chrome concentrate has dropped from USD 268/MT to USD 228/MT in October 2015, whereas state-miner OMC instead has increased the floor price of chrome concentrate from INR 9,263/MT to INR 9,912/MT. It can be observed that over the last one year, the price of international chrome concentrates has reduced by 15% whereas OMC has increased the floor price by 7%.
Also, the price of chrome ore domestically is a complete mismatch vis-a-vis the export price. MMTC had floated a tender for export of chrome ore. The tender bid FOB price was USD 205 per MT Basis 48% Cr2O3. Working backwards, the effective ex-mine realisation works out to INR 7,500/MT approximately. The current floor price for same grade is INR 9,945/MT in case of State miner OMC which is way higher than the export realization by a whopping 33%.
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