India: OMC iron ore auction sees subdued participation

OMC had scheduled an auction for iron ore lumps and fines today, 31 Aug'21. The auction received dull participation with lots fetching bids close to the base price. The auction fetched bids for only 238,000 tonnes (t) of iron ore lumps out of the total quantity of 765,000 t and for 20,000 t of iron ore fines out of 902,000 t put up for auction.

SteelMint's weekly Odisha iron ore fines index (Fe 62%) decreased by INR 1,200/t to INR 6,900/t (ex-mines, including royalty, DMF and NMET) on 28 Aug'21. Last week, Essel Mining had cut iron ore fines offers by INR 1,600/t. The market also expects a correction in offers of other miners in the short term.

OMC's iron ore fines auction received a dull response due to the drop in pellet prices. The current assessment for Barbil iron ore pellets (Fe 63%) stand at INR 11,650/t loaded on to wagon, down INR 800-900/t compared to the last month.

The market witnessed a downtrend owing to a steep drop in pellet export prices which hit a nine-month low last week.

Iron ore dispatches by state-owned merchant mining company OMC fell by 43% to 1.34 million tonnes (mn t) in Jul'21 from 2.37 mn t in Jun'21, according to SteelMint's data. A few trade sources believe that the revised earnest money deposit (EMD) criteria could be another reason for limited participation in OMC's auction.

The EMD should be deposited with MSTC at least one working day before the auction. The amount shall be refunded after successful lifting of at least 80% of the auctioned quantity. However, if the buyer fails to lift the allotted quantity, the penalty @2% (including GST) of the sale value of the calculated uplifted quantity shall be charged.

In case, the buyer has deposited the EMD with MSTC but is not taking part in the e-auction then he shall be considered a defaulter and restricted from taking part in the two consecutive e-auctions.

With 13.3 mn t of iron ore production in FY'21, OMC had emerged as the leading merchant miner in Odisha.