Sponge iron units face double whammy amid low market price, high costs in Odisha

Drop in market price and high cost of raw material hurt small and medium plants in Sundargarh district
Representational image
Representational image

ROURKELA: Abrupt drop in market price and the high cost of raw material are hurting the small and medium sponge iron units in Sundargarh district. With the sponge iron plants in MSME category facing huge losses, the Rourkela Chamber of Commerce and Industry (RCCI) has sought intervention of the state government and simultaneously written to the Odisha Mining Corporation (OMC) to help reduce the artificially high base price in e-auction of different grades of iron ore.

RCCI president Subrata Patnaik said in the last over 45 days, the situation has become worrisome for around 43 plants in Sundargarh with the market price of sponge iron plunging to Rs 30,000 from Rs 33,200 per tonne. These units are failing to cope with the situation due to the high cost of iron ore which is determined by the base price fixed by OMC in e-auction.

Patnaik said they have urged the OMC to reduce the base price by Rs 2,500 per tonne to help rationalise the market price of iron ore. “Under the present circumstances, the base price in e-auction is artificially high. While OMC’s iron ore is not in demand, other private players are also not reducing their prices.” He urged the government to intervene in the matter as sponge iron plants in Sundargarh are worried about survival if the adverse situation continues for long.

Former president of Odisha Sponge Iron Manufacturers’ Association (OSIMA) and industrialist Yogesh Dalmia said usually, a low base price in an e-auction attracts a large number of participants. The final price automatically goes up by 20-25 per cent to determine the fair market price. In the current scenario, the base price in e-auction of the commonly used iron ore is high at Rs 6,900 per tonne for which OMC’s stocks are not in much demand. Other private miners are also unwilling to reduce the cost of iron ore. This has created an artificial crisis.

He said Sundargarh district leads in the production of secondary iron and steel which is around 3.50 million tonnes per annum. While large sponge iron plants with their own captive mines are not feeling the pinch, the smaller ones are staring at closure. If this happens, it will hit the local economy and job scenario, Dalmia added.

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