India: Over 67% of material left unsold at SAIL iron ore auctions in Sep'21

PSU steelmaker Steel Authority of India Ltd. (SAIL) has sold over 300,000 t of iron ore fines at frequent auctions conducted from its integrated steel plants across the country in Sep'21, as per SteelMint data.

Iron ore sales at auctions in Sep increased by over 57% compared to around 196,000 t in Aug. However, a vast majority of the auctions that were held saw subdued participation, with a bulk of the offered material remaining unsold.

Two-thirds of material unsold

Auction-wise data compiled by SteelMint shows that nearly 650,000 t of iron ore was left unsold at SAIL auctions in Sep, which is an overwhelming 67% of the total quantity of 954,000 t offered during the month. More than two-thirds of iron ore fines put up for auction didn't find any buyer as bids drifted lower than the base prices at auctions.

In addition, interest for low-grade iron ore continued to remain low. As per SteelMint reports, 40,000 t of Fe 59.8% grade iron ore tailings offered by the Rourkela Steel Plant (RSP) on 28 Sep failed to attract participation, much like the 80,000 t of tailings of same grade offered from the Barsua mine in Odisha on 6 Sep.

Likewise, only 92,000 t of material (Fe 52.6%) was booked out of 368,000 t offered from the Dalli and Rajhara mines under the Bhilai Steel Plant (BSP) on 4 Sep.

Recently during a meeting with high-ranking SAIL officials, the Union Minister for Steel urged the PSU to chart out a roadmap to expedite sales of iron ore dump fines and tailings lying at SAIL mine pitheads in Jharkhand, Chhattisgarh and Odisha, with the total quantity estimated at around 70 mn t.

Prices plummet

However, buying interest was limited not just for low-grade fines. Fe 62.5% (indicative) grade fines from the Bolani mines put to auction on 24 Sep failed to attract buyers due to bid-offer mismatch, as per reports. The base price was INR 5,900/t on FOR basis including royalty and other statutory levies.

Notably, similar grade material had fetched a price of INR 7.530/t (loaded) at SAIL auctions on 31 Aug and around INR 6,050-6,100/t on 14 Sep, as per reports. It is, therefore, evident that prices have crashed rapidly throughout Sep.

Again, on 22 Sep, 80,000 t of Fe 60.5% fresh fines that went under the hammer failed to elicit bids at the RSP auction. The base price stood at INR 5,200/t for the auction.

Notably, SteelMint's assessment for Odisha iron ore (benchmark Fe 62%) fines prices plummeted to nearly one-year low of INR 5,050/t (including royalty, DMF, NMET, etc.) on 25 Sep. Prices are in free-fall due to declining pellet prices, lower bids compared to offers and fast-decreasing pellet export enquiries and realisations on prevailing bearish sentiments around steel production curbs and the falling property market and credit squeeze in China.

Outlook

Even though India's steel production fell marginally in Sep over Aug, the extended monsoon impacted domestic production thereby putting further pressure on iron ore prices. However, Odisha-based merchant miners are yet to formally slash prices and NMDC's price cuts have been far less drastic in Oct compared to Sep.

Although OMC's fines auction this month witnessed dismal participation, the downside for prices appears limited given the projected rise in steel demand in H2 FY'22. However, the supply situation in Odisha, post-auctions, will be a critical factor to watch out for.