Karnataka steelmakers fret as iron ore floor prices surge

Jan 08 2014, 13:41 IST
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'Lower-grade ore sees steeper rise than higher quality versions in past few months.' (AP) 'Lower-grade ore sees steeper rise than higher quality versions in past few months.' (AP)
Summary'Lower-grade ore sees steeper rise than higher quality versions in past few months.'

Steelmakers in Karnataka are crying hoarse as the floor prices of iron ore being e-auctioned in the state have surged much higher than the average price in the country.

According to e-auction data available from Karnataka, the prices of lower-grade ore have increased than that of the higher-grade ore in the past few months. In some rounds of e-auction, the price fixed has even surpassed the floor price of higher-grade ores and grades, or the base prices, on offer from Indias biggest miner NMDC.

As a case in point, for the round of e-auction held on December 13, the base price of iron ore fixed by NMDC for the fines produced from its Kumaraswamy mines was fixed at R2,050 per tonne for Fe grade of 60%. Similarly, the price of ore fixed for 59% Fe grade for the same e-auction was R2,110 per tonne, the base price of NMDC.

This is in sharp contrast to R3,100 per tonne and R3,400 per tonne fixed for 56% and 58% Fe grade, respectively, by private miners for the e-auction held on December 21 in Karnataka.

Fe grades classification in iron ore indicates the quality of an ore available from a particular mine. Fe grade of 60% and above is generally considered to be of good quality. Lower the grade, the poorer the iron ore quality, and it requires more investments in blending to improve its quality.

According to data of the e-auction conducted by SC-appointed Monitoring Committee, the base price of 59% Fe grade for e-auction fixed on December 21 was higher than the current prevalent rates of 59% Fe grade in Orissa, which is available at R1,700 per tonne, including royalty to the state.

Category-A mines are quoting much above the base price of NMDC as miners are free to fix rates in Karnataka and there is a major shortfall in demand. Since there is a huge demand-supply mismatch, miners are taking advantage of the situation, an official at JSW Steel said.

He said the base price of NMDC for 59-60% Fe grade iron ore has been in the range of R1,900-2,000 per tonne, while the base price for Category-A mines for even lower grade iron ore is as high as R3,400 per tonne. This was observed in the e-auctions held in December. Usually the Monitoring Committee conducts up to four e-auctions in a month where iron ore stock of NMDC and other private miners are sold.

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