India:OMC's iron ore dispatches plunge over 40% in Jul'21 as high prices reduce buying appetite

Iron ore dispatch figures reported by state-owned merchant miner Odisha Mining Corporation (OMC) has fallen by 43% to 1.34 mn t in Jul'21 against 2.37 mn t in Jun, SteelMint data shows.

Although Jul dispatches have fallen less steeply compared to Apr and May, the decrease in OMC's dispatches coincides with the 15%, m-o-m, reduction in Odisha's merchant iron ore dispatches in Jul, as per SteelMint reports.

While dispatches plummeted from, among others, the Daitari and Gandhamardan B iron ore mines of OMC in Odisha's Keonjhar district, marked declines on a monthly basis were recorded from Guali (78%) and Jilling Langalota (58%).

OMC started operating these two auctioned mines after months of non-production following the minerals auctions in Odisha early last year. Notably, dispatches from the Tiringpahar mine slipped by around 77%, m-o-m.

OMC iron ore dispatches and production

Qty in t
Prices in INR/t (Inclusive of Royalty, DMF and NMET)
Source: SteelMint Research

Sales slide on high prices

Dispatches plunged in Jul on account of weak demand at prevailing prices, SteelMint notes. While SteelMint's weekly assessment for Odisha iron ore fines (Fe 62%) has slipped to INR 6,900/t (inclusive of royalty, statutory levies and GST) as on 28th Aug'21, OMC had been slow to reduce offers even after leading merchant miners had cut prices. Iron ore prices have dropped around 25% since the beginning of Jun.

Moreover, pellet prices have inched down across major locations in eastern India triggering the decline in iron ore lump prices. In the absence of export offers, pellet prices are expected to dive down further thereby pressuring lump ore prices. Buyers are reportedly hesitant to book at current offers anticipating a further downslide in prices.

As reported earlier, OMC has major expansion plans for Guali and Jilling as well as Tiringpahar. Incidentally, the state-run miner's iron ore production in Jul stood at over 2 mn t vis-a-vis 1.51 mn t in the preceding month. Given the weak offtake volumes it can be assumed, therefore, that there has been a steady accumulation of undispatched material at OMC's mine sites throughout Aug. This is likely to drag down prices further.

OMC has reduced floor prices for iron ore fines and lump e-auctions to be held tomorrow (31 Aug), as per SteelMint reports, in view of weak buying interest at recent auctions at a time of fast-falling prices. Expectedly, this could go some way in boosting sales. OMC auction's 30% of its production (which is used for price discovery) and 70% is sold to its long term customers.

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