India: BigMint's Odisha iron ore fines index falls by INR 200/t ($2) post-OMC auction

• OMC auction fetches bids for over 2.5 mnt of iron ore
  
  
• Fines, lumps prices drop by INR 200-400/t post-OMC auction
  
  
• Falling global prices weigh on Indian iron ore export offers
  
  

BigMint's weekly Odisha iron ore fines (Fe 62%) index decreased by INR 200/t ($2) w-o-w to INR 5,450/t ($66) ex-mines on 24 February 2024.

OMC conducted an auction for 2.8 million tonnes (mnt) of iron ore (1.546 mnt of fines and 1.243 mnt of lumps) on 19 February. The entire quantity of fines (Fe54-65%) was booked at INR 3,910-5,850/t ($47-71/t) and 1.09 mnt or 88% of lumps (Fe 58-62%). Bids for fines increased by INR 100-1,050/t ($1-13/t) against the base prices. However, the majority of the lumps lots were booked at base prices, while bids increased by INR 50-1,700/t ($1-21/t)over the base price for some lots. The bids fell by up to INR 850/t ($10/t)and INR 700/t ($9/t) for the majority of the fines and lumps lots respectively against OMC's January auction, owing to a drop in sponge iron and pellet offers in central and eastern India.

Iron ore prices in Odisha remained downward after the auction results were declared by OMC, as a few buyers booked the material at lower prices compared to last month.

An Odisha-based buyer said, "The bids in the OMC auction dropped amid a downtrend in the pellet and sponge prices in the region in the last few days. Currently, only OMC has enough quantity to offer in the market while other merchant miners have very little stock left in the inventory as they have already sold the material."

The iron ore fines bids in the OMC action remained lower m-o-m by INR 200-800/t ($2-10/t) for the majority of the lots. Few buyers didn't book the material following the downtrend in downstream steel products. A few large buyers booked around 50-60% of the fines.

A key pellet producer said: "The current iron ore prices are not viable for pellet producers as their offers are moving southwards because of a poor export market, while sentiments are weak in the finished steel segment."

A market observer commented that the current market dynamics are very unpredictable in the short term. However, workable prices for iron ore in the Odisha region dropped after the OMC auction. Few merchant miners offered high-grade fines to clear stocks before the financial year-end.

Rationale:

• T1- Two (2) out of four (4) deals were taken from Odisha in this publishing window for price computation. These were given 50% weightage for index calculation.
  
  
• T2- BigMint received thirteen (13) offers and indicative prices under T2 trade deals in this publishing window. Nine (9) were taken into consideration and given 50% weightage. To check BigMint's iron ore assessment, pricing methodology, and specification document Click here.
  
  

Factors driving prices

• Pellet prices drop in Barbil: Pellet (6-20 mm, Fe 63%) prices in Odisha's Barbil decreased marginally by around INR 200/t ($2/t) w-o-w. The current assessment stands at INR 8,400/t ($101/t) loaded to wagon. However, pellet (Fe 63%, 6-20 mm) prices in Durgapur dropped by INR 150/t ($2/t) w-o-w to INR 9,200/t ($111/t) exw on 23 February.
  
  
• Export demand lull: BigMint's weekly Indian low-grade iron ore fines (Fe 57%) export index decreased by $2/t w-o-w to $81/t FOB east coast on 22 February. The index is hovering at a four-month low. A deal of 55,000 t of iron ore fines (Fe57%) was concluded at a 15% discount on the index. However, it could not be confirmed till the time of publishing this report.
  
  
• Iron ore spot prices decline w-o-w: The benchmark iron ore fines price sharply fell by $8.9/t w-o-w to $121.1/ t CFR China on 23 February 2024 after CNY holidays due to lower steel mills production margins, lower restocking activities along with market participants adopting wait-and-watch mode for price clarity.
  
  
• Sponge iron prices stable in Rourkela: BigMint's assessment for sponge iron C-DRI (FeM 80%) prices in Rourkela remained stable w-o-w at INR 26,450/t ($319/t). However, steel billet (100*100 mm) prices in Rourkela inched up by INR 200/t ($2/t)w-o-w to INR 38,500/t ($464/t)today.
  
  

Outlook

Iron ore prices in Odisha are likely to remain range-bound in the Odisha region because of enough bookings done by buyers in the OMC auction. A continuous drop in raw pellet prices in Odisha may also impact iron ore prices.