OMC to retender for fixing of iron ore and chrome prices

In a move that is likely to bring some relief to the industries depending on supply of raw materials by the Orissa Mining Corporation (OMC), the state owned mining company has decided to retender the fixing of prices of raw materials sold by it.

This follows the demand made by various industries including the Kalinga Nagar Industries Association (KNIA) for reduction of prices of raw materials like iron ore and chrome ore by OMC.

“Based on the lifting position of raw materials, the OMC board has decided to retender and fix the new price for October-December quarter”, Ashok Dalwai, commissioner- secretary, government of Orissa said.

However, he was non-committal on 30 to 40 percent reduction in raw material price as requested by the Kalinga Nagar Industries Association stating that OMC is a state owned commercial organisation and everything will have to be done in a transparent manner.

According to KNIA, the steel and ferro chrome units located in the Kalinga Nagar area are faced with a situation where they may be forced to close their plants.

Since the cost of production of pig iron and ferro chrome is much higher than the selling price, they have urged OMC to reduce the price of various raw materials.

For example, the cost of production of ferrochrome is about Rs 60,400 per tonne, where as the selling price is about Rs 51,000. Similarly, the production cost of pig iron is Rs 29,500 per tonne compared to the selling price of Rs 21,000 per tonne.

Kalinga Nagar Industries Association (KNIA), representing 9 units in Kalinga Nagar area has already submitted a memorandum to the secretary, steel and mines, requesting him to initiate measures for reduction of price of raw materials sold by OMC.

This assumes importance as the units located there are feeling the heat of the global meltdown with the prices of steel, sponge iron, pig iron, ferro chrome and other steel related commodities crashing. It may be noted, units located in the Kalinga Nagar include Tata Steel, Mesco Steel, Jindal Stainless, Visa Steel, BRPL, Dinabandhu Steel among others.

The KNIA memorandum states that the scrap price which hovered around $750 per metric tonne a couple of months back, has dropped below $300 per tonne. This has resulted in significant drop in the domestic price of pig iron. sponge iron and steel.

Similarly, the domestic pig iron prices have dropped from Rs 32,000 per tonne to Rs 24,000 per tonne. The sponge iron price has also declined to Rs 14,000 tonne from Rs 24, 000 per tonne .Though the product prices declined by Rs 8,000 to Rs 10,000, the iron ore price has only declined by Rs 540 per tonne.

The price of chrome ore (50-52 grade) in the OMC tender opened on 30th September was down by Rs 6850 to Rs 10,350 per tonne in July-Sept quarter from Rs 17,200 per tonne during October-December quarter.

The financial meltdown also resulted in reduction in the domestic and international price of ferro chrome from approximately Rs 90,000 per tonne to Rs 50,000 per tonne. While the product prices fell by Rs 40,000 per tonne , the chrome ore prices declined by Rs 6,850 per tonne.

“In view of the extremely depressed market conditions, we have drawn the attention of the state government that ferro chrome and steel operations are not viable in the present market conditions and requested the OMC to revise chrome ore prices downward from 1 November”, S N Mishra, chief Administrative Officer, KNIA told Business Standard.