Indian iron ore prices stable, market awaits OMC auction outcome

Iron ore prices in most of the Indian markets remained stable this week. SteelMint’s weekly Odisha iron ore fines (Fe 62%) index remained largely stable at INR 3,500/t ex-mines in the recent deals concluded. Market participants are waiting for the OMC auction outcome which is scheduled to take place next week. However, a few Odisha-based miners lifted offers amidst the tight availability of high-grade ore in the state, but trades are yet to take place at these offers.

Moreover, prices have also remained range bound in the recent auctions conducted in Karnataka. Offers from NMDC Chhattisgarh and Chandrapur were also stable.

Rationale:

• T1- An eastern India-based pellet maker booked around 100,000 tonnes of Odisha iron ore fines (Fe 62%) at INR 3,500/t ex-mines. This was considered for index computation.
• T2- SteelMint received seven (07) offers and indicative prices under T2 trade deals in this publishing window out of which four (04) were taken into consideration and given 50% weightage. To check SteelMint’s iron ore assessment, pricing methodology and specification documents Click here.

Around 100,000 t of iron ore sold in recent Karnataka auctions, prices stable – At Vedanta’s auction held yesterday, the entire quantity of 80,000 t of fines (Fe 57.5%) was booked at the base price of INR 1,325/t (excluding Royalty, DMF & NMET). Bids have remained stable against the previous auction. Some of the lots auctioned by Sri Kumaraswamy Mineral Exports and BKG Mining witnessed bids.

Iron ore offers from Chandrapur-based miner remained stable – fines (Fe 63%) at INR 3,500-3,600/t FOR Ballarshah.

Factors behind stability in Indian iron ore prices-

• Lower production amidst monsoon: India’s largest iron ore producing state – Odisha – recorded production of 8.4 mnt in August. Odisha’s iron ore production is slated to drop to a one-year low of 7.40 mnt in September 2022, as per SteelMint’s estimates. Such levels (7.4 mnt) were last seen in September 2021.
• Pellet prices in eastern India remain supported – Amidst monsoons, pellet offers in eastern India have also gained support. SteelMint’s price assessment for Durgapur was recorded at INR 7,300/t exw, up by INR 400/t m-o-m.

Outlook: State PSU miner OMC has scheduled an iron ore auction on 19 Oct’22. Around 0.752 mnt of lump ore and 1.087 mnt of fines will go under the hammer. The base price of the auction is yet to be disclosed. However, few market participants are expecting a hike in the base price. Buyers are awaiting the auction outcome for further price clarity. OMC produced 27 mnt of iron ore in FY22 compared to 13.06 mnt in FY21.