India: Nearly 2.7 mnt iron ore sold at SAIL auctions in FY'22

Steel Authority of India Ltd. (SAIL) has recorded sales of over 2.69 million tonnes (mnt) of iron ore via regular auctions in FY'22 from its captive mines in Odisha and Chhattisgarh, as per SteelMint data. In terms of total iron ore sales at auctions in the just-concluded fiscal, the company's Odisha mines had the majority share with over 85%.

The state-owned steel major has captive iron ore production capacity, as per EC limit, of nearly 60 mnt, although production was recorded at 33.7 mnt in 2021. The recent amendments in mineral rules by the Union Ministry of Mines have made it possible for the company to sell up to 50% of its iron ore production in the previous year in the open market on condition of payment of additional premium to the state governments.

Low-grade fines

SAIL also has around 70 mnt of dump fines and tailings accumulated at mine sites in Jharkhand, Chhattisgarh and Odisha for which the company has received separate sale permission from the Ministry. However, participation in auctions for low-grade iron ore remained dismal throughout last fiscal.

In the current calendar year, sales picked up somewhat in Feb-March after falling sharply in Jan on account of the overall lack of interest for low-grade iron ore. In fact, sales at auctions from the Dalli and Rajhara mines in Chhattisgarh have been low due to the lack of bids for dump fines and tailings.

As the share of low-grade iron ore allocation has been considerably higher in SAIL auctions, general lack of interest has translated into low overall sales at auctions vis-a-vis total offered quantity.

Limited allocation

Earlier in FY'22, sales at iron ore auctions were impacted in Apr'21 due to zero allocations from the mines in Odisha. Iron ore auctions from the mines in Odisha were cancelled as there was lack of clarity on whether SAIL would have to pay 150% or 250% of royalty as the additional amount for sale of iron ore. Again, due to administrative reshuffling in SAIL, negligible allocations for auctions in Jul resulted in subdued sales.

Standard to high-grade iron ore fetched high prices at the auctions of late, especially because of the relatively tight supplies of high-grade material. In Mar'22, for instance, out of total sales of a little over 150,000 t, the volume of Fe 60-62.5% iron ore sales was around 140,000 t.

High steel and pellets prices are expected to keep iron ore prices firm and, going forward, demand for standard grade fines is expected to remain robust in SAIL auctions.