NMDC may have to cut iron ore prices due to glut



Source: BUSINESS STANDARD

With sale of iron ore from Karnataka mines, including state-owned NMDC, having fallen sharply, miners may have to cut prices of the raw material in order to clamp down the glut situation, industry officials and brokerages said on 18 June. State-owned iron ore miner, NMDC Ltd has the highest contribution to Karnataka’s iron ore production which now stands at a ceiling of 35 million tonne from 30 million earlier. NMDC produces about 12 million tonne ore annually from its Donimalai mine in the state.

A senior Mumbai-based analyst on condition of anonymity said that “There is no option but to lower ore prices if the material has to get lifted. This may not happen immediately but over a period of three to six months, we see iron ore prices correcting in Karnataka.” Currently, Karnataka iron ore is priced close to INR 3,000 per tonne as against the Odisha ore which is close to INR 1,600.

Mr H Khayyumali, director of Federation of Indian Mineral Industries told Business Standard that “Karnataka ore price is higher than Odisha because demand is much strong compared to supply in this state. Since the state has a ceiling for production, there is always shortage of ore and hence prices are always beefy here.”

Apart from NMDC, Anil Agarwal-led Vedanta, MSPL Limited and Bellary Iron Ore pvt ltd are some of the iron ore miners in Karnataka. The total capacity of Karnataka iron ore mines can be extended upto 40-45 million tonne. In 2016-17 and 2017-18 the state produced around 27-28 million every year.

Mr Sumeet Dev, general manager-commercial at NMDC without divulging much information informed that “There is no discussion with regard to price revision of Karnataka ore at the moment.” The steel manufacturing industry in Karnataka is, however, of the view that miners should align their prices taking the quality of ore into consideration.

Mr Seshagiri Rao, group chief financial officer and joint managing director of JSW Steel explained that “The ore in Odisha is 62-63 fe grade whereas Karnataka ore is much lower at about 59.5 fe grade. Moreover, with higher moisture, alumina, and silica content in the ore, the Karnataka ore is feeble on several quality parameters compared to the Odisha or imported ore. With this kind of inferior quality ore, the price at which Karnataka ore is being sold to the steel industry is not justified.”

Sajjan Jindal-led JSW Steel is the largest buyer of Karnataka ore and it lifts about 60-70 % of the produced ore to cater to its 12 million plant at Vijay nagar.

Kalyani Steel and Kirloskars among others are some of the smaller steel manufacturers in Karnataka state that lift the auctioned ore.

Mr Rao explained that “Though on the face of it, it may look like JSW is buying outside ore at a higher price than Karnataka, the benefit in productivity due to superior quality ore works out at INR 2,600-2,700 per tonne. This is my gains in operations. And so, overall it works out to be cheaper for JSW.”

The company was said to be buying imported and Odisha iron ore for a price at about INR 4,000-4,500 per tonne as against Karnataka ore for INR 3,000 per tonne.

Mr Rao Informed that “We have been buying NMDC ore since 2011 for Karnataka plant as we had no option. Now that we have tested and figured that buying from outside is more beneficial and productivity is better, we have chosen the other option.”

The benefits experienced by JSW production team by sourcing ore from outside has been tremendous especially in terms of blast furnace production, lower slag volumes due to low impurities, lower fuel rates due to low alumina and consistent qualities and increased efficiency of operations due to certainty of feed mix.

Mr Rao said that “The productivity benefits have brought us to a conclusion that sourcing material outside Karnataka is far better than using inferior material at such inflated prices.”

India has three major iron ore regions Odisha, Chhattisgarh and Karnataka. Iron ore is the key raw material used in the making of steel.

Source: BUSINESS STANDARD