Unreasonably high iron ore prices result in fall in pellet production
Jump in production costs, low margins also impact output
By A K Sahoo
Bhubaneswar, May 22: Pellet production in Odisha has been seriously hit due to high iron ore prices. Many of the producers have gone for sharp curtailment in pellet production.
The price of the ore with 62 per cent iron content (Fe) in Odisha’s Koira circle was recently revised to Rs 6,002 per tonne, up from Rs 5,751 per tonne quoted in the January-March quarter. Similarly, the rate of 65 per cent grade iron ore has was recently increased by Rs 1,100 per tonne to Rs 7,611 a tonne by the Odisha Mining Corporation (OMC).
In fact, the OMC decides mineral prices in the state through a quarterly auction process.
“Most of the iron and steel industries procure iron ore as their raw material. As the minimum price of iron ore fines fixed by OMCs is very high, very negligible quantity of iron ore fines is sold every time they go for auction,” an industry source said on Sunday.
The iron and steel industry in Odisha is largely dependent on the supply of iron ore from OMC. But it seems that iron and steel industries across the state are being strangled by fixing unreasonably high floor prices for iron ore and iron ore fines during e-auction, which is not viable for the industries. Hence, industry bodies in Odisha have been urging the OMCs to reduce the price.
Reports from Kalinga Nagar Industrial Complex in Jajpur and other industrial estates in the state said many units have been closed for a long time due to unfair price fixing of iron ore by the OMCs.
“We demand that OMC should immediately reduce the floor price of iron ore and CLOs (Calibrated Lumpy Iron Ores) and fines and let the Odisha based industries survive,” a pellet producer said.
However, OMC officials could not be contacted for comment.
Reliable sources said, of the total 1.364 million tonnes put up for auction last week, only 0.150 million tonnes of iron ore was sold by the OMC. Iron ore fines, only 0.016 million tonnes were sold at the minimum base price and 0.135 million tonnes of iron ore fines and calibrated lumpy ore (CLO) out of 0.618 million tonnes were sold at the base price without any premium.
The failure of the auction is being attributed to the very high floor price fixed by the OMCs and profiteering at the cost of pellet and sponge iron manufacturers in the state. Pellet plants and sponge iron plants have started shutting down in the state of Odisha due to unviable iron ore prices.
Steel producers in India are largely dependent on pellets produced in Odisha. Apart from high cost of iron ore, an unattractive export demand from China has also prompted some of the pellet producers to prepone their units for annual maintenance.
The industry sources informed that India’s pellet production in the financial year 2022-23 (FY23 was recorded at a provisional 84 million tonnes (mnt), up 7 per cent y-o-y. Of this, exports were at around 7.8 mnt. Thus, nearly 76 mnt of pellets were consumed domestically.
On an average, India produces 7 mnt of pellets monthly. Industry apprehends that this volume might drop by 25-30 per cent to 5-5.3 mnt in May.
