India: Iron ore sales at SAIL auctions in Dec'21 rise sharply m-o-m; prices remain subdued

Around 216,000 tonnes (t) of iron ore was booked at auctions conducted by steel major SAIL in Dec'21 - just about 26% of the total quantity of 832,000 t that went under the hammer from the company's mines in Odisha and Chhattisgarh, as per monthly data compiled by SteelMint.

Allocation, sales improve

However, iron ore sales surged by a whopping 260% month-on-month compared to just 60,000 t in Nov. Sales in Oct had been higher at 300,000 t.

Alongside sales, total iron ore allocation for auctions had dwindled in Nov. One key reason was nil allocations from SAIL-BSP's captive mines in Chhattisgarh. SAIL officials told SteelMint that allocations were stopped due to low realisation at auctions compared to finished product sales.

Although auctions from the Chhattisgarh mines resumed in Dec, a meagre 52,000 t was allocated from the Dalli and Rajhara mines at two auctions, none of which received any participation. In fact, participation remained dismal throughout the month, with auctions towards the latter half of Dec getting concluded at reduced prices for low-grade ore.

Notably, SAIL's Bokaro Steel Plant (BSL) invited an expression of interest (EOI) for long-term agreement for sale of 4 million tonnes (mn t) of iron ore dump fines (Fe 56-62%) over a period of two years from its Gua iron ore mines in Jharkhand.

SAIL had stopped conducting iron ore auctions from Jharkhand after Dec'20 and total inventory of low-grade fines at the company's mines is estimated at 70 mn t.

Prices under pressure

High reserve prices discouraged participation at auctions. For example, 100,000 t of iron ore dump fines (Fe 60.5%-indicative) from the Bolani iron ore mines in Odisha failed to attract bids on 14 Dec. The base price was INR 3,300/t (ex-mines, inclusive of royalty, DMF, NMET and additional premium).

Material of similar grade from Bolani received bids at INR 2,950/t on 30 Dec.

Out of 140,000 t of Fe 62.5%-indicative grade ore, the company received bids for 56,000 t at INR 5,050/t on 15 Dec. Bids fell by INR 1,000/t compared to the last auction for similar grade material held on 27 Oct.

SteelMint's weekly Odisha iron ore fines index (Fe 62%) slipped by INR 150/t w-o-w to INR 4,600/t ex-mines on 15 Jan. OMC's iron ore fines auction for 1.17 mn t held on 15 Jan received flat bids, except for high-grade ore. A little over 1 mn t of ore was booked at the auction.

Higher pellet export enquiries on restocking demand in China and rising global iron ore prices have lifted domestic market sentiment. However, recovery in iron ore supplies after Q3CY'21 remains a major downside for prices.