Iron ore prices shoot up in Odisha after mines closure
May 20 2014
Production comes down from 72 mt per annum to 30 mt
The state which used to produces around 72 million tonnes per annum of ore is producing around 30 million tonnes only. Ore prices in the state started moving up much before it has been anticipated. Pellets prices also grew by Rs 300 to Rs 500 per tonne. The prices were expected to move u but not so early experts said.
“Globally iron prices 63 grade are trading at $88 to $90 FOB from $93 to $ 94 FOB in the last on week. But in the domestic market with the ban in iron mining with deemed licenses demand for iron is expected to rise significantly and miners who are operating are trying to cash on this opportunity. Duvvuri said that the increase in price should not have happened so early and we expected the prices to go up at least after two weeks,” said Prakash Duvvuri, head research at oreteam.com.
Duvvuri further added that the worst part is some miners are trying to stock iron ore and have stopped selling it in anticipation that prices would further escalate.
With the increase in iron ore prices steel companies like Steel Authority of India and Tata Steel will be facing double challenge as the iron ore prices are rising while domestic demand for steel continues to remain low, analysts said.
The steel companies are not in a position to pass on increase in input costs to customers at the moment as demand continues to remain subdued. Some miners whose mines are operational in Odhisa are trying to take advantage of the situation and increasing prices while globally iron ore prices have declined due to subdued demand, an analyst at Prabhudas Lilladher said declining to be identified.
Further the landed price of steel is coming down due to lower input costs globally and steel imports are likely to increase which would put further pressure on domestic steel companies, said the analyst.
Sanjay Jain, an analyst at Motilal Oswal also said that the margins of steel companies will be significantly impacted with the increase in iron ore prices and if the companies have to buy it from the open market. Both Tata Steel and Sail have captive mines in Odhisa and they were getting iron ore, a key raw material for steel manufacturing, from their captive mines which helped them to sustain good margins. While it is expected that both the companies maybe having sufficient stock for at least couple of months but if the ban continues beyond that it would have a significant impact on their margins.
SAIL, chairman, CS Verma, had said, “Steps required for expediting the approvals of renewal of mining leases by state government have been speeded up. We have sufficient stock to sustain our plant operations for the time being and thus there is no cause of any worry on thiscount.”
Tata Steel spokesperson declined to comment. The SC on Friday ordered temporary closure of around 26 mainstream mines in Odisha due to non-renewal of leases. The mines include those operated by Tata Steel and Sail. The Odisha government is believed to have been given six months to dispose pending applications of such mines, according priority to captive mining.
Among the 26 iron ore and manganese mines awaiting second and subsequent renewals are those of Tata Steel (Khandabandh, Katamati, Joda East, Joda West, Bamebari, Manmore, Guruda & Tiringpahar), SAIL (Bolani), Odisha Minerals Development Company (Belkundi and Bagiaburu M-block), Kalinga Mining Corporation (Jurudi), Essel Mining & Industries (Jilling-Langalota), Patnaik Minerals (Jaribahal) and KJS Ahluwalia (Naugaon).