India: Iron ore e-auction sales in Karnataka drop 20% in Jan'23

• NMDC's sales fall by 2%
  
  
• Iron ore fines prices hit 4-month high
  
  
• Production in Karnataka to drop around 4 mnt in FY'23
  
  

Iron ore e-auction sales volumes in Karnataka decreased by 20% m-o-m in January 2023. Total quantity sold in the month was 1.75 million tonnes (mnt) compared to 2.18 mnt in December.

NMDC sales down 2%

NMDC sold 1.07 mnt of iron ore via e-auctions in Karnataka in January against 1.09 mnt in December. The miner sold 824,000 t of fines (Fe 59-63.31%) and 248,000 t of lump ore (Fe 61-64.97%).

India's leading iron ore miner has floated EoI for empanelment of long-term agreement (LTA) customers in Karnataka after the apex court paved the way for direct sales. 90% of sales will be through LTAs and the remaining 10% through e-auctions.

NMDC's iron ore production in Karnataka is expected to be around 12 mnt in FY'23. Production in FY'22 was 12.2 mnt, as per SteelMint data.

e-auction highlights

Iron ore sales from the second leading miner, KSMCL, increased by 10% to 314,000 t in January against 285,000 t a month ago. KSMCL sold 262,000 t fines (Fe 54.18-63.24%) and 52,000 t of lumps (Fe 52.07-63.22%%)

Iron ore sales from the other leading miner, Vedanta, increased by 7.6% to 112,000 t in January against 104,000 t a month ago. Vedanta's entire quantity of 112,000 t was iron ore lumps (Fe 57.5%-58.5%).

SMIORE sold 74,000 t of iron ore via e-auctions in January against 193,000 mnt in December. Total sales fell by 62% compared to the previous month.

Iron ore supplies in the state are expected to rise in the coming time, while e-auctions still remain the preferred mode of sales for transparent price discovery.

Top sellers:

Fines prices edge up

The weighted average fines price in January rose by INR 100/t against December's to INR 2,500/t (ex-mines, excluding royalty, DMF & NMET). Prices have hit a four-month high, as per SteelMint data.

Sales drop post SC verdict

Iron ore sales in Karnataka dropped 27% y-o-y in 2022. Sales (including estimated direct sales) stood at 22.6 mnt in 2022 against 30.9 mnt in 2021.

Notably, the apex court, in a key judgment in May 2022, had lifted the ban on iron ore exports from mines in Bellary, Chitradurga and Tumkur districts in Karnataka, paving the way for direct sales. Setting aside its 2011 order of disposal of the accumulated iron ore through the process of e-auction conducted by the Central Empowered Committee (CEC)-appointed Monitoring Committee, the apex court ruled in May that direct contract sales and/or spot sales would henceforth be allowed.

IBM's average sale prices are issued after a delay of 2-3 months and so miners are left to their devices to discover and sell at a certain price each month and then adjust accordingly. This has added to confusion, sources said.

Outlook

SteelMint estimates Karnataka's iron ore output to fall to around 36 mnt in the ongoing fiscal from over 40 mnt in FY'22.

Iron ore production has fallen by almost 8% y-o-y in 2022 to 35.15 mnt against 38.35 in 2021. However, the fall in production is lower compared to sales and this is largely due to improved production from the captive C category auctioned mines.