India: NMDC's iron ore fines price hits record high on tighter domestic supplies

India's state-owned iron ore miner - National Mineral Development Corporation (NMDC) has announced 2nd price hike iron ore for this month. Prices have increased further upto 11%.

The miner has raised price for Baila fines and lump by INR 300 and INR 400 respectively while that of DR CLO by INR 460/t. With today's price revision made, company's fines price has hit an all-time high while that of lumps are hovering close to five-year high levels.

The revised prices for Baila fines (Fe 64%) stands at INR 3,610/t, Baila lump (Fe 65.5%) is assessed at INR 4,000/t and DR CLO (Fe 67%) at INR 4,640/t. NMDC sets prices on a free-on-road (FoR) basis and does not include royalty and taxes.

Reasons behind hike in prices -

Tighter supplies -The Odisha government "successfully"auctioned16 iron ore mines earlier this year. The auctions saw active and aggressive participation from the industry fetching premiums as high as 150%. However, as on Sep'20 only 7, of the 16 mines auctioned, have been able to start production. 2 bidders are unlikely to sign leases and 3 auctioned mines are subject of legal dispute.

The Odisha High Court hearing on plea for extension of timeline for disposal of iron ore stocks with erstwhile lessees scheduled for 16 Nov'20 has been postponed to 20 Nov'20, sources told SteelMint. The stocks, assessed at over 16 mn t, had to be cleared by 31 Oct'20. SteelMint estimates most of these stocks to be of low grade (below 58%) ore and to be difficult to liquidate.

NMDC's iron ore production for the second quarter FY21 (July-Sep'20) was recorded at 5.64 mn t, down 15% against 6.61 mn t in Q1 FY21. The output fell amid high rainfall affecting the Bailadila region for most of the quarter.

Consecutive price hikes by Odisha based merchant miners - In the last one month Odisha based merchant miners have hike offer around INR 1,800/t. Essel Mining has increased iron ore fines price by around INR 1,200/t in the last two price hikes and INR 700/t in lumps followed by Rungta hike. Tighter availability of ore is resulting in continuous price rally.

Raipur pellet offers hit all time high- Pellet offers in Raipur have hit all-time high. Raipur based pellet makers are currently quoting offers of INR 11,500/t exw-Raipur, up by INR 2,100/t m-o-m.

Hike in sponge iron prices - Pellet sponge (P-DRI) prices in Raipur also increased around INR 5,000/t in a month's time to INR 25,200/t exw Raipur.

Outlook- Domestic iron ore prices are expected to remain on the higher side unless some more auctioned mining leases resume production which may ease availability in merchant market.