Essar Steel and JSPL comments on Indian iron ore scenario.
Major merchant miners in Odisha have recently announced price hike of INR 250/MT in lumps and INR 100/MT in fines. Fines (Fe 63%) prices are hovering around INR 1,200/MT ex-mines, inclusive of Royalty, DMF & NMET. It is expected that other miners may also follow suit.
According to miners, sharp surge in sponge iron prices has resulted in increase in Odisha iron ore prices. Sponge iron offers in eastern region of India gained strength because of shortage of rake availability, costlier coal prices and better demand.
On one hand domestic iron ore prices have gone up. On the other hand, global iron ore prices have fallen. Seaborne iron ore fines (Fe 62%) prices have fallen by USD 7/MT, M-o-M to USD 55/MT, CFR China.
Increase in domestic prices despite decline in global offers has upset steel makers. SteelMint spoke to few major steel and pellet makers and gathered their views on the same.
“There is marginal increase in the prices of iron ore fines in Odisha. This increase will have an impact on the cost of steel production. However, we feel the increase in prices of iron ore fines is not sustainable due to softening of iron ore prices globally”, Mr H Shivramkrishnan, Director – Commercial, Essar Steel India Limited.
Steel companies will always weigh the option of import of iron ore,if that is more economical than the domestic ore. As far as Essar Steel is concerned, the pellets are largely used in our steel plant, he added further.
Mr. Manish Kharbandha, Executive Director & CEO at Jindal Steel & Power Ltd shared “Recent increase in Odisha iron ore prices will impact the steel industry negatively. He suggested that the state government should ensure that merchant miners should ramp up their production in accordance with their laid EC limits so that there is no scarcity of iron ore in domestic market. Odisha government should also address the logistics issues so that material transportation eases out further.”
Iron & steel industry outlook – SteelMint Analysis
1. There is an increase in Odisha iron ore production in this fiscal but still the production is not in accordance with the EC (environmental clearance) limits granted to the miners. SteelMint expects state’s iron ore production to touch 95 MnT in this fiscal.
2. Pellet offers in eastern regions of India may move up by INR 100-200/MT provided stability persists in pellet sponge prices.
3. Falling global iron ore prices may create room for imports.
4. Sponge iron prices in domestic market are expected to remain firm and may not fall sharply. Presently sponge iron price are as follows: C-DRI (78 FeM) in Durgapur – INR 13,200/MT and P-DRI (78 FeM) in Durgapur – INR 12,400/MT.
5. Major rebar makers namely – SAIL and RINL have already raised rebar prices in Sept’16 over increase in secondary steel prices. Also, amid costly coking coal, domestic flat and pig steel manufacturers have also raised offers considerably in Sept’16. Owing to upcoming festive seasons and seasonal demand pick up, domestic steel prices are expected to remain positive.
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