Domestic iron ore prices in India, moved up towards the end of CY17 ahead of supply disruption after Supreme Court ordered the suspension of mining activities in Odisha from 01 Jan’18 on an inability of submission of compensation amount over illegal mining case.
NMDC (C.G) iron ore prices in CY’17- NMDC (C.G) increased iron ore prices for Fe 64% fines by 28% in CY’17 against CY’16. On similar lines, DR-CLO prices moved up by 23% Y-o-Y in CY’17. On the quarterly basis, NMDC fines were up by 4% in Q4 CY’17 against Q3 CY’17.
Odisha merchant miners increased iron ore prices significantly in CY’17- Odisha merchant miners increased fines prices by 14% in CY’17 against in CY’16.
In Q4 CY’17, iron ore fines prices in Odisha moved up by 16% and lump (5-18mm) prices by around 15% against Q3 CY’17.
Karnataka iron ore E-auction Prices increased sharply in CY’17- Karnataka average E-auction iron ore prices for Fe 63% Lumps in CY’17 were up by 37% in CY’16. Similarly, fines (Fe 60%) prices were increased by 47% to INR 2170/MT against INR1, 480/MT in CY’16.
Karnataka sold iron ore via E-auction in CY’17 to 29.02 MnT increased marginally against 28.87 MnT in CY’16.
Reason for Surge in Iron ore prices in CY’17-:
1. An expectation of supply disruption post SC order – With the inability of few key merchant iron ore miners to submit compensation amount by the laid deadline, other miners raised offers anticipating supply disruption from the beginning of Jan’18.
2. Iron ore rake movement Disruption-: In Odisha, iron ore rake movement disruption in Sept and Oct led to delay in iron ore movement in eastern India and later in October disruption of railway line connectivity of Andhra Pradesh route also badly affected iron ore movement from NMDC Chhattisgarh mines to southern India.
3. Higher Global iron ore Prices – Yearly average global iron ore fines (Fe 62%) prices increased by 22% Y-o-Y to USD 71/MT, CFR China in CY’17 compared to USD 58/MT, CFR China in CY’16. High global iron ore prices and comparatively cheaper domestic material resulted in fall in import volumes.
4. Hike in semi-finished steel prices – Domestic sponge iron and billet prices moved up sharply in Q4 CY’17 which supported iron ore price hike.
What may happen in 2018?
1. As Apex court in Karnataka allowed to increase iron ore mining cap from 30MnT to 35MnT may increase production from the miners in the FY’19. Also, the Category “C” iron ore mine blocks in the state will add up to state’s production.
2. With few Odisha mines like Essel(Jilling) and RP Sao asked to resume operations, state’s iron ore production may augment as they have a total capacity of around 12MnT p.a. It may possible that increase iron ore supply in the market may put iron ore prices under pressure.
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