International iron ore prices, after hitting a five-year high of $121 have mellowed to $93 (on August 12) as supplies from Brazil have stabilised sooner than expected. Spot prices are faced with a downside with easing of supply turmoil, lacklustre steel demand outlook and Chinese steel mills loath to book additional shipments.
But domestic iron ore has not seen the desired correction even as global prices go into a downward spiral with forecast of further easing. For instance, in Odisha, the largest iron ore producer, prices (ex-mine) of 62 per cent Fe fines have hovered around Rs 2,500 a tonne with sporadic marginal cuts. Both merchant miners of Odisha and NMDC have retained status quo on prices despite a glut in domestic market and steel producers disquieted by continuous fall in product prices since January.
Jindal Steel & Power Ltd (JSPL), a top producer has urged Odisha Mining Corporation (OMC) to cut prices by 30-35 per cent and accord priority to state-based integrated steel makers and other end-use industries.
“OMC is requested to declare all material that is available so that the supply side remains firm, and realistic rates are realised. These prices will have a cascading impact on other merchant miners who would then be forced to reduce prices for supporting the end use industry in Odisha”, JSPL said in a letter to OMC.
JSPL has invested Rs 43,000 crore on a six-million-tonne-per-annum (mtpa) integrated steel mill at Angul and a nine-mtpa pellet complex at Barbil. The steel maker is financially stressed as escalating input costs and subdued demand weigh on its operations. The Naveen Jindal-led firm is sourcing iron ore from OMC via long-term linkage and also buying at the electronic auctions.