Rejecting the claims of state-based steel makers that iron ore sold by Orissa Mining Corporation (OMC) is “exorbitantly” priced, the state-run resources company has said iron ore rates in the state are not higher than other states and rather, they are more or less similar to national and international prices.
“Though our iron ore prices are not directly linked to international market, they reflect global price sentiments as many exporters are buying the commodity without any hesitation”, said Saswat Mishra, managing director of OMC.
Earlier, the state-based steel makers had alleged 'manipulated bidding' in OMC tenders, and said OMC iron ore rates are close to National Mineral Development Corporation (NMDC) ore rates, which are linked to international markets.
India’s largest iron ore miner NMDC fixes the ore prices on quarterly basis for its buyers in Japan and South Korea. The prices are calculated taking global demand and supply scenario into consideration.
Similarly, iron ore exporters at Paradip port follow the price benchmark in China. If they do not protest about the pricing, why steel makers are making it an issue? asked Mishra.
High quality iron ore is currently quoted between Rs4,000-Rs4,500 per tonne at the mines. After adding the transportation cost to the port, the ore rate becomes $140 to $150 per tonne or about Rs 6,500 per tonne, excluding the shipping charges of $20 per tonne for leading buyers in China.
China's imported ore prices are currently hovering around $174-$175 per tonne. More than 80 per cent of Indian iron ore is shipped to China, while China's India imports stand merely 10 per cent of its total iron ore imports.
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The OMC official further said if a Chinese steel maker can make profit after buying ore from India, then it should be same with Orissa-based steel mills.
“If they (Orissa steel mills) are not making profit, it means they are using inferior technology and process. The steel market is not for those who are financially, economically and managerially backward. It (iron ore pricing) is a cyclical process, and there will be ups and downs,” explained the MD.
As per the current practices, OMC floats tender for 10 per cent of its salable quantity and fixes the highest bidding amount as the benchmark price of that grade ore for three months.
The All Odisha Steel Federation, an association of steel makers who have signed Memorandum of Understanding (MOU) with the state government to set up steel mills , has termed the tender process ‘faulty’ and said it is being manipulated by a few players, who internationally bid for higher amount to help increase the price of ore produced by private miners.
However, OMC official did not agree with the idea of selling iron ore through commodity exchange platform and said though auction via exchanges is a way for effective price discovery; it will not ensure supply to regular customers.
There are few companies who have proposed us to sell iron ore through commodity exchanges, but we have not accepted the idea. Because as per the government instruction, we must provide iron ore to MoU-signed steel makers on priority basis,” said Mishra.