Odisha Mining Corporation (OMC), a state government controlled entity may soon bar traders from participating in its iron ore and chrome ore auctions. The move to deter traders from bids stems from the concerns flagged by the industry on the impact of their participation in pricing of the two key raw materials. Usually, OMC holds such electronic auctions every alternate month.
“The state government will work on a policy that will disallow the traders from participating in the e-auctions of OMC. The industry, particularly the steel makers had requested the government for this step and we are responsive to their grievances”, said a senior Odisha government official.
Recently, the Union steel secretary Aruna Sharma had pitched for conducting separate e-auctions for end users and the mercantile category. This move, she felt could draw the line between profit and profiteering by miners and ensure availability of iron ore and other raw materials at optimal and affordable prices.
Though India has the second best manufacturing cost of steel within the plant premises, steep input costs were eroding the competitive edge of the domestic producers. It has also been observed that when steel prices head north, iron ore prices were hiked by the lessees and other suppliers to cash in on the advantage.
OMC’s e-auctions witnessed subdued buying interest as buyers shunned due to its prohibitive float price. During the last auctions held earlier this month, OMC offered 508,000 tonne of iron ore of which barely 200,000 tonne was booked, meaning an unsold inventory of 308,000 tonne.
Both iron ore lumps and fines were on offer from OMC’s key operating mines of Gandhmardhan, Daitari and Koira.
The response to the auctions was weak as OMC continued its stand to hike base prices of lumps and fines. The floor price of lumpy ore was in the range of Rs 2200-2600 per tonne. Similarly, fines’ reserve price was fixed in the band of Rs 900-1300 a tonne. The raise in floor prices by OMC was despite plunge in sponge iron prices of the order of Rs 2500-Rs 3000 per tonne since the last auctions.
Though OMC has drawn a road-map for higher iron ore output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. OMC had set a target to achieve a production figure of 20 million tonne (mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around six million tonne.
“We are constrained to scale up our iron ore mining capacity because of pending environment clearance. The environment ministry is neither granting fresh environment clearance for expanding existing mines nor green clearance for the virgin mines as a report on the carrying capacity study in the Talcher-Joda belt by NEERI is pending. Till the report and its findings are commissioned, the green nod for our mining projects is stuck”, said a senior OMC official.
All major steel industries – Visa Steel, Jindal Steel & Power Ltd (JSPL), Bhushan Steel Ltd and MMTC promoted Neelachal Ispat Nigam Ltd (NINL) are buying iron ore from OMC through long-term linkage.
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