Bhubaneswar | Jan 27, 2015: Online auction of iron ore conducted by Odisha Mining Corporation (OMC) today received lukewarm response because of higher floor prices fixed by the company, said traders and steel producers.

Out of 257,000 tonne iron ore put up for auction, only 28,000 tonne was sold in the e-auction process at base prices, they added.

For the online auction, the state-run miner had fixed base price of fines in the range of Rs 2,380 - Rs 2,856 a tonne and Rs 3,427 to Rs 4,379 a tonne for lumps. In the October online auction, the rates were in the range of Rs 2,500 - Rs 3,000 and Rs 3,600 - Rs 4,600 a tonne for fines and lumps respectively.

Though the floor rates have come down, auction participants said, they do not reflect trends in domestic markets.

"OMC is quoting Rs 2,900 per tonne for iron ore fines, while other private miners are offering at Rs 2,500-2,600 a tonne in the state. The rate differences show there is some defect in the price fixation system in e-auction," said a senior official of a large private steel plant in the state. OMC has been providing linkage iron ore to the local steel plants, constituting half of its total iron ore output, at the rate derived from online auction for end-use plants and traders at the national level.

Steel makers said, such method is faulty as most of the private miners try to manipulate the auction rate, which is often referred as benchmark rate for next round of auction.

"Private miners depute traders to take part in the auction process, who deliberately jack up the prices and never bother to actually consume the minerals. They end up losing their security deposits for not lifting the mineral, but still are not worried as they are compensated by the private miners, who gain market share and profit by selling ore at lower rates than OMC," explained the steel industry official.

Sources in OMC confirmed that out of 600,000 tonne iron ore lump and fines put up for last auction in October, about 150,000 tonne has not been lifted by the traders and end users due to logistic and financial problem. As per a resolution of the state steel and mines department, half of the minerals produced by merchant miners are to be supplied to steel producers without having captive mine, at the rate equivalent to average price of last two online auction rates.

Accordingly, OMC has earmarked 2.5 million tonne iron ore and private miners such as Rungta, Essel Mining, MGM, Serajuddin have agreed to provide 4.2 million tonne ore to steel units in the Jan-March period of current financial year. The steel units which are eligible for linkage include Essar Steel, Brahmani River and Pellets Ltd (BRPL), Jindal Steel and Power Ltd (JSPL), Visa Steel and Bhushan Steel.

(Source: http://www.business-standard.com/)