India: Iron ore lump fetches bids higher by 30% in recent OMC auction
State-owned miner Odisha Mining Corporation (OMC) had scheduled an e-auction for iron ore fines and lumps on 15 Jan’22. Around 0.86 mn t of iron ore lump and 1....
State-owned miner Odisha Mining Corporation (OMC) had scheduled an e-auction for iron ore fines and lumps on 15 Jan'22. Around 0.86 mn t of iron ore lump and 1.17 mn t of fines were put up for auction from OMC's mines.
The lumps auction received aggressive participation and bids increased by up to INR 3,600/t over the set base price. On a weighted average basis, bids were higher by around 30% over the set base price.
Hike in pellet offers and sponge iron prices amid the rally in coal prices were the key reasons behind the hike in bids. SteelMint's bi-weekly domestic pellet (Fe 63%) index, PELLEX, stood at INR 11,300/tonne (t) DAP Raipur on 14 Jan, up INR 150/t against the last assessment on 11 Jan. PELLEX has climbed to a two-month high as similar price levels were last seen in mid-Nov. Sponge iron (C-DRI) price in Rourkela, is hovering at INR 33,550/t exw, up by INR 3,000/t m-o-m.
Also, the market participants informed that there are limited offers for high-grade ore (Fe 63%) in the market, with a few mines having exhausted their EC limits.
Fines auction fetches flat bids: The fines auction received flat bids i.e. in line with the base price, except for the high-grade lot which fetched a premium of INR 400/t, as per SteelMint sources. The key buyers were Orissa Metaliks, Rashmi Metaliks, BRPL and Super Smelters.
Change in auction schedule - State-owned miner Odisha Mining Corporation (OMC) has brought about changes in its monthly iron ore auction cycle, as reported by SteelMint. The auctions are being shifted to the middle of every month to enable officials to form a clear idea of the updated price declarations made by merchant miners as part of their F1 returns to the Indian Bureau of Mines (IBM) rather than following relatively old IBM prices, sources informed.
IBM's average sales price (ASP) is a price discovery mechanism wherein the actual transaction price of the leading non-captive mines in a state, sold at arm's length basis, is captured. In short, ASP is the weighted average of the ex-mine prices of merchant mines. Auctions are a price discovery mechanism for OMC. Around 70% of its production is sold to long-term linkage customers, and the balance 30% is sold via auctions. However, the weighted average prices at the auctions are also applicable for OMC's long-term linkage customers.
Importantly, the state PSU miner has increased its total allocation for the monthly auctions in a major way after new mines came its way following months of non-production post the Odisha mineral auctions prior to 31 Mar'20.
With iron ore production of more than 13 mn t in FY'21, OMC came out as the leading merchant miner in Odisha. Company's production stands at over 14 mn t in Apr-Nov'21. OMC's expanded iron ore capacity stands at 34.24 mn t per annum.