For past several months, Odisha government owned miner Odisha Mining Corporation (OMC) has been struggling to fetch a better price for its chrome ore in the monthly e auctions. Response from the buyers has been so weak that OMC is unable to sell even 50% of the material it puts up for sale. The continuous weak response has forced OMC to rethink the monthly e-auctions and it is now planning to conduct the e-auctions bi-monthly.
In the last e-auction held on June 1, OMC had offered 52,800 mt of chrome ore, wherein very weak response compelled OMC to sell the material at base price. The company has kept the base price low/unchanged for the last several months due to weak demand.
Though chrome ore prices have been stable (sold at base price) for the last few months, if compared on a year on year basis, a sharp drop in prices can be seen. In the chrome ore e-auction held in June 2015, the price of 54+ grade friable chrome ore was INR 14,889 and the price of 52-54 grade was INR 13,523, which at present are INR 8,982 and INR 8,649 respectively.
So what has changed in this last one year? Industry insiders cite several reasons for the sharp fall in prices. The basic reason is weak demand and increased availability of the raw material used in ferro chrome making.
Leading ferro chrome makers in the state like VISA and Rohit Ferrotech have been operating at reduced capacities for last several months, amid financial constraints, due to weak demand of ferro chrome in the domestic and international markets. Due to this, these companies have limited their chrome ore buying from OMC. Ferro chrome demand in the international market has been weak for the last one year mainly due to the China factor. China, the world’s largest importer of ferro chrome is going through a slowdown which has affected its ferro chrome imports.
While there is limited demand for chrome ore, increased availability of the material has pressurized the prices further. Availability of chrome ore has increased in the last one year after resumption of production from Tata’s Sukinda mines and other two merchant chrome mines viz Mishrilal and BC Mohanty mines.
Tata produced more than 1 million tonne of chrome ore in the last fiscal. The company has also signed conversion agreements with 3 ferro chrome manufacturing companies ie Aarti Steel, Navbharat and Tirumala Balajee. These companies were the major participants in the monthly OMC chrome ore e-auctions.
Meanwhile, after getting supply from Tata, these plants have become less dependent on OMC for chrome ore. Another leading buyer of OMC chrome ore is JSL. While JSL is getting chrome ore from OMC under the long term linkage policy, it has also been a major and aggressive participant in the e-auction. However, for the last several months, it has reduced chrome purchases from OMC’s e-auction platform and has increased purchases from Tata. Weak response to monthly auctions is also increasing OMC’s chrome inventory.
These 3 merchant chrome ore mines are scheduled to expire in March 2020. So the lease holders are trying their best to increase their production. BC Mohanty Mines has applied for environmental clearance to enhance capacity of its chrome ore beneficiation plant from 36,000 mt to 66,000 mt.
While the domestic production of chrome ore is increasing, restoration of high export duty has once again made exports unviable. This will further boost domestic availability of the material.
Source: Steel 360 Magazine July’16 Issue