Odisha miners cut iron ore price by 10% on improved supply

16th April 2018

Mining companies in Odisha, which account for more than 50 per cent of national production and supply of iron ore to steel plants, have cut their prices by about 10 per cent in the new supply contracts drawn up in April.

This is despite the indication by another big supplier government-owned NMDC to not slash ore prices in April.

While the price of iron ore fine quoted by Odisha suppliers has come down to Rs 2,000 per tonne from Rs 2,200 per tonne, the sized ore (lump) price has slumped to Rs 4,300 per tonne, from Rs 4,800.

Last month, prices had seen a similar fall of Rs 200 to Rs 250 per tonne for fines and Rs 450 to Rs 500 for lumps.

Compared to January, when the iron ore rate had peaked on fears of a supply crunch after closure of some large mines in Odisha, the reduction has been to the extent of Rs 500 per tonne for fines and Rs 1,000 per tonne for lumps.

The rate for fines had gone up from Rs 1,400 a tonne to Rs 2,500 a tonne and lumps had risen from Rs 3,200 a tonne to Rs 5,300, between October and January. The fall in iron ore prices owes to easing of their supply apprehension. Some big mines which were shut after a December 31 deadline for payment of compensation towards excess mining during 2001 to 2011, in violation of green norms and approved mining plans, have resumed operations.

The closure of mines had threatened to knock off 20 million tonnes (mt) of production capacity.

The reopening of other closed mines, shut since 2014 for lack of statutory clearances, has greatly improved the scenario. Around 25 mt of capacity is estimated to have been restored last month and another 8 mt capacity is expected to be in operation this month, with renewal of clearances of five more mines.

In addition to easing of supply, the recent fall in prices of end-products like sponge iron and pellets, whose manufacturers are the major chunk of consumers for Odisha miners, has put pressure on ore prices, explains a mine owner. Sponge iron price had come down from Rs 6,000 per tonne to Rs 5,200 and pellet prices from Rs 22,000 per tonne to Rs 19,000 in the past couple of months, he said.

The price of iron ore is expected to stay more or less stable, as mining companies which have paid large amounts as compensation for overproduction would be eager to recover the amount before 2020, when the tenure of these leases expires, in line with a new law.

Source: BUSINESS STANDARD