Even though steel mills are facing acute shortage of raw materials for their blast furnaces, they showed no urgency to buy iron ore at the recent electronic auctions (e-auctions) held exclusively for the ore by state-owned NMDC Ltd.
At the e-auctions held on October 5 for about 1.14 million tonnes (mt) of iron ore, buyers showed interest to buy barely 160,000 tonnes, about 14 per cent of the stock.
This is a significant development considering the fact that most major steel mills are facing huge shortage of iron ore in the absence of regular mining in the state. Most of these are operating at between 50 per cent and 80 per cent of their installed capacities.
Major steel producers in Karnataka, such as JSW Steel Ltd, BMM Ispat Ltd, Kalyani Steels Ltd and Kirloskar Ferrous Industries Ltd are operating their blast furnaces at very low inventory levels due to delay in resumption of regular mining in the state.
On September 2, 2011, the Supreme Court had allowed e-auction of 25 mt iron ore from the stockpile to enable steel mills to source the raw material after banning mining in the state in its July 29, 2011 order. It had also allowed NMDC to mine up to one mt per month and sell it through e-auctions.
The lack of interest on the part of buyers was attributed to a very high base price fixed by NMDC. The company had fixed the base price in the range of Rs 4,900-5,300 a tonne for lumps with 63-64 per cent Fe grade.
“We have written to the Central Empowered Committee (CEC) to ask NMDC to announce a cut in prices. As far as prices of other iron ore is concerned, the Monitoring Committee has effected 10 per cent reduction after prices declined in the international markets,” an official associated with the e-auctions told Business Standard.
Iron ore fines with 64 per cent Fe grade are auctioned at a base price of Rs 3,030 a tonne, while 65 per cent Fe grade lumps are auctioned at a price band of Rs 5,700-5,800 a tonne. The monitoring committee has till now sold 28.6 mt of iron ore through e-auctions, of which 7.4 mt were from NMDC. Another four mt of iron ore is likely to be auctioned in two months.
Meanwhile, NMDC has lowered the domestic iron ore prices by up to 11 per cent for October. Prior to the price reduction, NMDC had fixed Rs 6,100 a tonne for lumps and Rs 3,000 a tonne for fines.
“We have reduced the prices for October and the prices are also reduced for the stocks sold through e-auctions in Karnataka,” a senior official said.