Despite state-owned mining major NMDC announcing a cut in iron ore prices, steel companies haven't shown much interest in buying the company's ore at e-auctions on Friday. Of the 1.02 million tonnes (mt) auctioned by NMDC, steel firms bought only 1,72,000 tonnes.
"Even after the price reduction by NMDC, the prices were not on a par with international market rates. It is not feasible to buy at such high rates, as the landed cost of ore would still be much higher," sources said.
Yesterday, NMDC had announced a cut of 10-11 per cent in iron ore prices for November. This followed several domestic steel mills approaching the steel ministry over the high prices being charged by NMDC in the domestic market.
At Friday's e-auctions, NDMC had fixed a base price of Rs 4,500-5,000 per tonne, depending on the grade of iron ore (a mix of calibrated ore and fines, with 63-64 per cent Fe). A total of 26 participants bid for about 1.5 mt of ore. Along with the final bid price, buyers also had to pay 10 per cent royalty, 12 per cent forest development tax and 5.5 per cent value-added tax to the state government on the ore purchased at the auctions.
Friday's auctions also saw interest for low-grade iron ore fines from Mineral Enterprises Limited (MEL). Steel mills bought about 7,00,000 mt of ore at Rs 1,000 a tonne, against the base price of Rs 650 a tonne.
In a month, MEL had produced about 35,000 tonnes from its mine in Chitradurga district. The company, which falls under Category A mines, was the first to secure all statutory approvals. However, it had to suspend operations after its mining lease expired on October 6. In Karnataka, iron ore auctions started in September 2011, following a Supreme Court directive. Earlier, the court had imposed a temporary ban on iron ore mining. Since the e-auctions began, about 32 mt of iron ore has been auctioned in the state. Of this, about eight mt is accounted for by NMDC.
Though the Supreme Court had allowed NMDC to produce up to one mt of ore a month from its mines in Bellary district, the company could produce only up to 7,00,000 mt a month, owing to logistical constraints.