Karnataka iron ore sales slump

Sales of iron ore from Karnataka mines have taken a hit in the past two months. Steel companies have raised their buying from Chhattisgarh and Odisha, reasoning that the ore from these places has higher iron content than in Karnataka (64 per cent versus 60 per cent or less, respectively).

Even state-owned NMDC has been able to sell only a fourth of its output (via e-auction) in these two months; other companies say they have sold less. As a result, the pile of unsold stock is now around 2.8 million tonnes (mt) in the state. This is despite the Supreme Court having raised the Karnataka iron ore production cap from 30 mt a year to 35 mt.

Ramana Kumar, secretary, Karnataka Steel Producers Association, says local suppliers (including NMDC) have changed from a uniform pan-India pricing to a differential one, charging higher for lower quality from the state.

The landed price of ore from other states is higher than what is available in Karnataka, concedes Seshagiri Rao, group finance head at JSW Steel. However, “looking at the inferior grade, poor availability and pricing premium, we have tried material from other sources, including import and purchase from Odisha. This has had a very positive impact. Operations efficiency increased due to certainty of feed mix."

NMDC says Karnataka ore is priced at a discount and the sourcing of ore "from alternate sources by

some major buyers is surprising and not justified". It expects things to improve from the July-September quarter, given the positive trend in demand for products from the segment in the past two months.