Dual Blow to Industries

Steel cost comes down, iron ore price goes up

Published: 31st July 2015 07:01 AM  |   Last Updated: 31st July 2015 07:01 AM   |  A+A-

BHUBANESWAR: Caught between the falling steel and sponge iron prices and rising floor price of iron ore from Daitari Mines, the steel industry in the State has been dealt a serious blow.

In the last e-auction on July 9, the Odisha Mining Corporation (OMC) fixed the floor price for iron ore lumps at Rs 2,600 per tonne while rate for the fines was pegged at Rs 1,700. The auction was meant for 1.2 lakh tonne iron ore lump and 60,000 tonne fines.

Interestingly, the OMC received bids for only 14,000 tonne iron ore lumps which constitute a meagre eight per cent of the total quantity. There was no bid for 60,000 tonne iron ore fines and the residual 1.06 lakh tonne lumps during the auction.

Since the last tender, the sponge iron prices have dropped by at least Rs 1,700 per tonne while steel prices have fallen by Rs 1,500. With the floor price remaining the same, there has been no bid from the steel industry to buy the ore.

The falling product prices, industry sources say, should have been accompanied by a corresponding drop in floor price of iron ore to make operations viable for steel makers but the PSU has stuck to its ground without paying attention to the market conditions.

“On one hand, the corporation has been dispatching much lower quantity of ore than its production from Daitari but on the other, the inventory levels have been rising every month. This not only leads to a drop in quality of the ore but also results in high wastage because of the rains,” sources said.

In January, the OMC produced 1.17 lakh tonne ore (lumps and fines) but dispatched only 1.07 lakh tonne leaving the total closing stock at 1.49 lakh tonne. In May, it raised 1.75 lakh tonne but dispatched only 98,663 tonne and ended up with a huge stock of 2.48 lakh tonne.

Experts point out that arbitrary fixation of the floor price has led to this kind of situation where OMC has huge unsold stock while the steel industries are suffering because of high ore prices and under-utilisation of their capacity.

“It is high time the OMC reduce the floor price for the unsold quantity and carry out fresh e-auction lest only mines and the PSU will make profit while steel industries will sustain losses with no margin to cover the costs,” an industry insider said.

The All Odisha Steel Federation has also written to the Chief Secretary for a revised floor price of the ore.

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