India: SteelMint's Odisha iron ore fines index falls INR 500/t ($6) post OMC auctions

SteelMint's weekly Odisha iron ore fines (Fe 62%) index decreased by INR 500/t to INR 4,200/t ex-mines on 22 July, 2023 compared to the last assessment on 15 July. Buyers actively participated in Odisha Mining Corporation's (OMC) latest auction due to lower inventories and reduction in base prices by OMC.

OMC conducted an auction for 2.152 mnt of iron ore fines (Fe 54-62%) and 859,000 t of lumps (Fe 58-62%, 5-40 mm) on 20 July. OMC had reduced the base price for fines by up to INR 750/t and that of lumps by INR 1,400-1,800/t compared to the previous auction, which impacted iron ore offers in Odisha.

The entire quantity of fines was booked at INR 3,000-4,250/t ex-mines. Bids for low-grade ore increased by up to INR 600/t over floor prices. However, medium- and high-grade ore got booked at base prices. Around 546,000 t of lumps, or 63.5% of the total material, was booked at floor prices except some lots which witnessed bids inching up by INR 50-100/t over floor prices.

As per sources, buyers are also approaching Chandrapur miners for high-grade material at reasonable prices. Following the decline in iron ore prices, domestic pellet prices are likely to remain under pressure in the near term.

Rationale:

• T1- Two deals were recorded and considered for price calculation this week. They were given 50% weightage for index calculation.
  
  
• T2- SteelMint received ten (10) offers and indicative prices under T2 trade deals in this publishing window. Eight (8) were taken into consideration and given 50% weightage. To check SteelMint's iron ore assessment, pricing methodology, and specification documents Click here.
  
  

Factors affecting iron ore prices in Odisha

• OMC reduces base prices: OMC reduced the base price for fines and lumps compared to the previous month, which forced miners to reduce iron ore offers in Odisha. As per sources, currently miners have little material to offer in the market during the rainy season, as they are sitting on low inventories.
  
  
• Pellet prices stable in Barbil, drop in Durgapur: Raw pellet (Fe63%, 6-20 mm) prices in Odisha's Barbil remained stable compared to last week. The current assessment stands at INR 7,650/t loaded to wagons on 21 July. Raw pellet (Fe63%, 6-20 mm) prices in Durgapur, however, decreased by INR 400/t to INR 8,100/t exw on 21 July. Pellet prices may fall in the coming days as fines were booked at low rates, and semi-finished and finished steel prices have declined.
  
  
• Sponge prices inch down in Rourkela: SteelMint's assessment for sponge iron C-DRI (FeM 80%) prices in Rourkela decreased by INR 150/t to INR 26,800/t exw on 22 July compared to last week. Prices decreased to an over-2-year low. Billet prices decreased by INR 350/t w-o-w to INR 40,100 exw Rourkela on 22 July.
  
  

Outlook

During the monsoon season, logistical constraints are likely to keep iron ore movements restricted.