India: Iron ore concentrate prices remain stable; market awaits OMC auction results

• OMC cuts base price for auction
  
  
• Pellet, iron ore market sentiments weaken
  
  
• Onset of monsoon to put pressure on prices
  
  

Iron ore concentrate prices in Jabalpur, central India, remained stable this week. Odisha Mining Corporation's (OMC's) base price cut announcement along with bearish sentiments in pellet and Odisha iron ore market weighed on concentrate market, BigMint notes.

BigMint's weekly iron ore concentrate index stood at around INR 4,800/t ($57/t) exw, unchanged as against the last assessment on 15 June.

"Buyers are asking for concentrate at lower offers now post drop in pellet and iron ore prices", said a Jabalpur-based seller.

Another seller from the region said, "We have kept offers unchanged and waiting for OMC auction results for clarity".

Meanwhile, a Kandla-based trader told BigMint, "Current concentrate offers are not feasible at all. We expect offers to be around INR 4,000/t exw".

Rationale:

• Two (2) trades of 22,000 t were recorded in this publishing window, and were considered under T1 trade and was accorded with a 50% weightage.
  
  
• Eight (8) offers and indicative prices were reported, out of which seven (7) were taken into consideration as T2 trades, receiving 50% weightage.
  
  

Why are concentrate prices under pressure?

• OMC cuts base price for iron ore auction: OMC has scheduled an auction for around 2.917 million tonnes (mnt) of iron ore (1.796 mnt of fines and 1.121 mnt of lumps) on 20 June. The miner has reduced base prices m-o-m by up to INR 250-300/t and INR 1,150-1,350/t for both fines and lumps, respectively. The continuous drop in pellet, sponge iron and steel prices has forced the miner to reduce the base prices for the upcoming auction.
  
  
• Pellet prices fall further: BigMint's bi-weekly domestic pellet (Fe 63%) index dropped by INR 350/t ($4/t) to INR 10,300/t ($123/t) DAP Raipur on 18 June compared to the last assessment on 14 June. Pellet buying (for Fe 62.5/63%) interest remained absent in Raipur amid lacklustre market sentiments over the last few weeks. Buyers entered for a wait-and-watch mode and didn't book any material ahead of OMC's iron ore auction. Declining sponge iron and other semi-finished steel prices also kept buyers away.
  
  
• Odisha iron ore fines down INR 150/t w-o-w: BigMint's Odisha iron ore fines (Fe 62%) index dropped by INR 150/t ($2/t) w-o-w to INR 5,300/t ($64/t) ex-mines on 15 June. The iron ore market in Odisha remained volatile this week post-elections as most steelmakers remained away from the market. Trading activity slowed down amid weak market fundamentals and the continuous drop in pellet and sponge iron prices in the central and eastern regions.
  
  

Outlook

Iron ore concentrate offers are expected to exhibit volatility in the near term amid fluctuation in pellet and Odisha iron ore prices. Meanwhile, demand for concentrates typically slows down during the monsoon - which is expected to weigh on offers.