India: SAIL iron ore auctions receive weak response in Jan'22 on limited buying interest for low-grade ore

Iron ore auctions conducted by PSU steelmaker SAIL in Jan'22 received weak response, with just 8,000 tonnes (t), a little over 4%, of the total quantity of 196,000 t receiving bids, as per SteelMint data.

Although Dec sales at SAIL auctions had been recorded at 216,000 t, they accounted for only about 26% of the total quantity of 832,000 t put under the hammer.

The weak response to SAIL auctions is due to the lack of interest for low-grade iron ore as well as the disparity between buyer expectations and the base price at auctions for standard grade ore.

As in Dec, the company logged zero sales from its mines in Chhattisgarh: the auction for 52,000 t of low-grade iron ore fines (Fe 51.11- 57.25%) from the Dalli-Rajhara mines on 10 Jan didn't receive participation. SAIL resumed auctions from its Chhattisgarh mines in Dec after a brief lull in Nov.

Owing to some technical glitches and installing of new equipment's, the iron ore availability low from Odisha due to which allocations in Jan'22 were low. As per the recent notification, Raw Material Handling Plant (RMHP) of SAIL's ISP has installed an electro-magnetic separator at the reclamation route of the ore handling plant area in the flux dispatch circuit which had been facing issues during flux Crushing operation. This is likely to improve offered quantity in the near term.

Going forward using in-house resources the RMHP solved the problem of interruption in crushing operations for about 2 hours per day.

Price scenario

The auction for 84,000 t of iron ore fines (Fe 62.5%) from the company's Bolani mines in Odisha on 25 Jan received bids for only 8,000 t offered at INR 5,990/t (loaded, including royalty, DMF, NMET and additional premium). The material fetched bids at the base price. The auction drew lacklustre response due to the high base price, sources said.

Around 56,000 t of similar grade ore had received bids at INR 5,050/t at an auction from Bolani on 15 Dec - a rise of around INR 1,000/t in little over a month for standard grade domestic fines.

SteelMint's index for iron ore fines (0-10mm, Fe 62%) was assessed at INR 5,400/t exw Odisha on 5 Feb, up INR 650/t in the span of a month.

Notably, high-grade ore is at a premium in India's top iron ore producing state of Odisha, as indicated by state-owned OMC's iron ore fines auction on 15 Jan for 1.175 mnt in which 85% of the material received bids. The high-grade lot in the auction fetched a premium of INR 400/t in contrast with the flat bids for comparatively lower-grade ore.

SteelMint data shows that SAIL's iron ore production in CY'21 stood at 33.7 million tonnes (mnt) - only 56% of its total EC limit of nearly 60 mnt.