Karnataka steel firms look East for cheaper, better iron ore

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High prices of iron ore routed through e-auctions and issues linked to iron content in dispatches are forcing steel and sponge iron-makers in Karnataka to look to Jharkhand and Orissa.

Mr Dinesh Kumar Singhi, Managing Director of Karnataka-based BMM Ispat, told Business Linethat the base price of Rs 2,010 a tonne for the 57-per-cent iron grade in the last auction was too high, considering that buyers were getting the same earlier from NMDC Ltd for about Rs 1,400-odd a tonne, before the Supreme Court on September 2 directed the State to hold e-auctions.

He said there were no takers for about 65 per cent of the stocks lined up for the last auction conducted on October 14.

When told that NMDC officials had said the pricing was in line with those in China and Japan, he said the price of 57-per-cent grade in China was about $110 (Rs 5,390), which factored in about Rs 3,000 for transport, beside 20 per cent export duty.

On Karnataka e-auction prices, he said in addition to the base price, buyers would have to pay 10 per cent for royalty, 12 per cent as forest-development charges and 1 per cent cess, totalling 23 per cent more, which pushed the price to Rs 2,472 a tonne. Transport would cost another Rs 750 a tonne.

The 57-per-cent grade has to undergo beneficiation to match the requirements of steel and sponge iron-makers. The conversion ratio in general is 1.55 tonne, which makes a tonne of 63-per-cent-plus iron grade.

Mr Singhi said BMM Ispat bought 3.2 lakh tonnes in the e-auctions, before the last one, but were able to clear only 35,000 tonnes from the designated centres, which were open from 6 am to 6 pm. Further, e-permits could not be obtained as the Mines and Geology Department server was invariably down. Transport was also an issue with designated centres in remote places.

Further, there were quality issues with supplies obtained through the auctions. While NMDC follows the practice of compensatory payment if the quality (grade) is below what is quoted (laboratory analysis by third-party assayers is an accepted industry practice), e-auctions do not provide for the same.

In comparison, the 63.5-per-cent grade from Jharkhand could be got at Rs 4,200 a tonne, inclusive of the transport cost of Rs 2,200. Besides, quality and timely delivery are assured. Continuous running plants cannot be shut down and delivery schedules to clients have to be maintained, he said.

 

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