India: BigMint's Odisha iron ore fines index rises INR 600/t ($7/t) following OMC auction

• Around 2 mnt iron ore receive bids in OMC auction
  
  
• Auction fetches an average premium of over INR 1,000/t m-o-m
  
  
• Other merchant miners yet to hike iron ore offers
  
  

The eastern region is seeing a rise in raw material prices as demand edges up ahead of the festive season. Steelmakers are eager to restock as participation in OMC's auction indicated, thereby keeping iron ore prices supported.

BigMint's Odisha iron ore fines (Fe 62%) index increased by INR 600/tonne (t) ($7/t) w-o-w to INR 5,600/t ($67/t) ex-mines on 19 October 2024. No high-grade fines (Fe62+%) deal was recorded from other merchant miners except in the OMC auction.

The iron ore market in Odisha has experienced a significant price rise due to a combination of factors. These include a previous increase in auction base prices by OMC and increased bidding by steelmakers in the auction. This upward trend is expected to continue, with private miners planning to raise prices by INR 500-700/t, as market adjustments are anticipated in the coming week.

OMC conducted its latest auction for 1.98 mnt of iron ore on 18 October in which the entire quantity of fines (1.06 mnt) were booked INR 3,150-5,800/t/t, while 0.78 mnt of lumps were booked out of 0.918 mnt at INR 5,200-7,700/t. Bids (weighted average) for the fines and lumps lots increased by INR 1,250/t and INR 1,450/t, respectively, compared with last month's auction. The base prices for both fines and lumps increased by INR 850-1,800/t m-o-m. This hike follows rising iron ore and pellet prices, coupled with a reduction in dispatches from Odisha.

"The finished steel market needs to strengthen for stable market dynamics. Strong demand for finished steel products is essential for market stability. Prices may be revised next week as we analyse market sentiments. Some orders are still pending dispatch to buyers," a miner informed.

As the industry braces for further price adjustments, the interplay between raw material costs and finished steel prices will be key in shaping the market outlook in the coming weeks.

Rationale

• T1 - Four (4) deals of Fe 62% fines were recorded in the publishing window. Three (3) were considered for price computation and were given a 50% weightage for index calculation.
  
  
• T2 - BigMint received eighteen (18) offers and indicative prices under T2 offers, indicative, and bids in this publishing window. Sixteen (16) were taken into consideration and given a 50% weightage. To check BigMint's iron ore assessment, pricing methodology, and specification document, click here.
  
  

Market highlights

• Mixed trend in pellet prices: Pellet prices in the domestic and seaborne markets showed a mixed trend this week with a drop in the global iron ore fines index. Pellet (6-20 mm, Fe 62.5%) prices in Odisha's Barbil remained stable w-o-w at INR 8,100/t ($96/t) loaded to wagon. Pellet (Fe 62.5%, 6-20 mm) prices in Durgapur rose by INR 600/t ($7/t)w-o-w to INR 9,950/t ($118/t) exw on 18 October. However, offers are likely to increase next week. BigMint's India pellet (Fe 63%, 3% Al) export index (FOB east coast) dropped by $7.5/t w-o-w to $94/t on 18 October.
  
  
• Fines export prices drop w-o-w:BigMint's bi-weekly Indian low-grade iron ore fines (Fe 57%) export index dropped by $3.5/tonne (t) w-o-w to $60/t FOB east coast on 17 October 2024, with no deals reported in this period. Exporters have largely adopted a wait-and-see stance, holding back from making deals as they anticipate a possible improvement in seaborne prices.
  
  
• Sponge iron prices stable w-o-w: BigMint's assessment of sponge iron C-DRI (FeM 80%) prices in Rourkela remained largely stable w-o-w at INR 29,600/t ($352/t) on 19 October. Meanwhile, steel billet (100*100 mm) offers in Rourkela decreased by INR 250/t ($3/t) w-o-w to INR 40,250/t ($479/t) today.
  
  

Outlook

Prices of iron ore in Odisha are expected to stay strong as miners plan to increase their offers next week. Demand is likely to rise as the peak steel season approaches after the Diwali festival, which may prompt buyers to restock.