Ironore insight

Iron Ore Insight

13 MAY 2013

11 May 2013

NMDC holds Iron ore prices for May

Particulars

(Rs/MT)

Price

M-o-M Change

Fe% 63/5-18 mm

7,100

150

Fe% 65/6-40 mm

4,600

0

1,800 132 136.5

0 6 1.5

7,400

100

Steel Grade

22,767

450

80 FeM

18,800

1,200

Grade/Size

Iron ore Lumps

In contrast to market predictions, Nation's largest state owned Iron ore miner - NMDC with an annual production capacity of 30 MnT, unchanged iron ore prices for May on account of improved sales in April.

Odisha (Rungta Prices, Loaded to wagon, Including Royalty) NMDC (Basic Prices, Royalty & Taxes extra)

A total of 2.4 MnT of iron ore was produced by NMDC in April 2013, out of which 2.3 MnT was sold out.

Domestic (Ex Mines Odisha, Including Royalty) Fe% 63 Export (CFR China in $/MT) Iron ore Forward Swap ($/MT) Fe% 62

NMDC’s Iron ore prices for May: Kirandul lumps 6-40 mm Fe% 65 Rs 4,600/MT Bacheli ROM 10-150 mm Fe% 64 Rs 4,000/MT Iron ore fines Fe% 64 Rs 2,610/MT (Basic prices, excluding royalty and taxes) Only, 10-140 mm DRO-CLO Fe% 67 is available at prices

Rungta Mines cuts Iron ore lumps prices for May One of the largest merchant miner of Iron ore n India Rungta mines Ltd with 12 MnT annual production capacity and mining operations in Odisha and Jharkhand, lowered prices of lumps by Rs 150/MT for May delivery. Whereas, fines prices were unchanged.

Rungta mines Iron ore prices for May: 5-18 mm CLO Iron ore lumps Fe% 65 Rs 7,500/MT 5-18 mm CLO Iron ore lumps Fe% 63 Rs 7,100/MT Iron ore fines Fe% 63 Rs 2,300/MT (Laded to wagons at major sidings in Barbil,Odisha, including royalty).

Supreme Court hearing on Sesa Goa’s Iron ore export appeal on July 7

R

egarding exports of Iron ore lying at various sites in

Goa, mined before Supreme Court imposed ban on

Iron ore Fines

Iron Pellet Odisha (Loaded to wagon, Basic Prices) Indian Index (Ex Cuttack) Sponge Iron Raipur (Basic Prices)

Vessel Freight Vessel Type

Freight Rate (US$/MT)

India East Coast- China

Supramax

13

Brazil- China

Capesize

17-18

Australia- China South Africa- China

Capesize

7-8

Panamax

20

Route

India's Iron ore output in FY 2012-13 drops by 15% Y-o-Y

I

ron ore production in India dropped over 15% to around 142 MnT (provisional) in FY 2012-2013, against 169 MnT in 20112012 due to curb on illegal mining and exports.

Figures have come down drastically, especially after Supreme Court, in September 2012, put a ban on mining activities in Goa, which contributes almost 20% of India's total iron ore output.

Karnataka contributed to 9% of total production in 20122013. Moreover, Odisha government found irregularities and violation of environmental and mining norms, which resulted in suspending operations at some major mines. Odisha contributes to almost 40% of India's total iron ore production.

mining, Sesa Goa’s appeal to the state government to allow its exports as it would be washed away during monsoon and impact the environment, has been looked into.

Supreme Court would take up the case for hearing on July 7.

Fe% 63

Pig Iron

Seema Goenka Analyst seema@steelmint.com +91 95751 00530

Iron Ore Insight

13 MAY 2013

Iron Pellet KIOCL opens May Iron Pellet e-tender at Rs 7,550/MT (ex works) Kudremukh Iron ore Company Limited (KIOCL) - India's state owned Iron Pellet producer with 3.5 MnT annual production capacity, is offering Fe% 63 Pellet at Rs 7,550/MT (Ex-Works Mangalore) to its enrolled customers for May, through the e-tender floated on April 30.

A total of 1.265 MnT of Pellet was produced by KIOCL in FY 2012- 13 as sales were limited to domestic market.

Iron Pellet offers turn down in Odisha Looking at the softening prices of sponge iron in domestic market and quiet weak demand for Iron Pellet, manufacturers based in the state of Odisha have lowered Pellet prices in the range of Rs 250-300/MT to Rs 7,4007,550/MT (ex works).

One of the large manufacturer of Pellet based in Odisha has, for May, taken a shut down on annual maintenance reasons. Though, this could have proved as an advantage for other producers, dull markets has offset the same.

“

O

disha based Iron Pellet makers told SteelMint, "There is no demand for Pellet even after offering it at lower prices. In the weeks ahead, we forsee a further drop in prices of Pellet, provided there is no improvement in trades from the sponge iron units".

Iron Pellet prices range bound in Karnataka Due to high power prices, Indian sponge iron offers have touched levels seen two years back, which ultimately resulted in low capacities. Hence, Pellet demand has been hampered and availability of expensive and inferior quality lumps has further squeezed margins of Pellet producers.

Negative sentiments are built up at the moment due to continuous drop in steel prices. This has limited the buying interest from the few operational sponge iron units, running at minimum production capacities.

Current offers of Pellet with Fe% 62 is in the range of Rs 7,100-7,400/MT (Ex works) and material with Fe% 60 material is at Rs 6,600/MT One of the manufacturer is offering discount of Rs 150/MT on purchase of 5,000 tons of Pellet.

Indian Iron ore Ref. prices as on 11 May 2013 ( M-o-M change) ODISHA RUNGTA - Jajang (Loaded) 5-18mm (65%) 5-18mm (63%) 10-30mm (65%) 10-30 mm (63%) RUNGTA - Koira (Loaded) 5-18 mm (62.50%) 10-30 mm (62%) Fines (63%)

Rs 7,500/MT Rs 7,100/MT Rs 6,750/MT Rs 6,370/MT

150 150 150 150

Rs 6,800/MT Rs 6,200/MT Rs 2,300/MT

RUNGTA - Jharkhand (Loaded) 5-18 mm (62%)

Rs 6,700/MT

EMIL-Koira (Loaded) 5-18 mm (63%) 10-30 mm (63%) Fines (63%)

Rs 7,075/MT Rs 6,325/MT Rs 2,275/MT

SERAJUDDIN 5-18 mm (Ex-Mines) )63%) 5-18 mm (Loaded) (63%) Fines (Ex-Mines) (63%) Fines (Loaded) (63%)

Rs 5,600/MT Rs 5,950/MT Rs 1,800/MT Rs 2,020/MT

150 150 325

INDRANI PATNAIK (Ex-Mines) Rs 5,700/MT 5-18 mm (63%) Rs 5,200/MT 5-18 mm (61%) Rs 2,000/MT Fines (Loaded) (63%) AMTC (Ex-Mines) 5-18mm (63%) 10-30mm (62%)

Rs 6,200/MT Booking closed Rs 4,500/MT Booking closed

B C DAGARA (Ex-Mines) 5-18mm (65%) 5-18mm (63%) 10-40mm (65%) 10-40mm (63%)

Rs 6,400/MT Rs 6,200/MT Rs 6,200/MT Rs 6,000/MT

KJS Ahluwalia (Ex-mines) 5-18mm (63%)

Rs 5,400/MT

300

10-30mm (61%)

Rs 4,700/MT

200

Fines (63%) Royalty included, Taxes extra

Rs 1,800/MT

100

Rs 7,400/MT

100

PELLETS (Loaded) 5-18 mm (63%)

All Prices are including Royalty, Taxes Extra

Iron Ore Insight

13 MAY 2013

In conversation with SteelMint about Indian Sponge iron industry Mr. M. K. Sheshadri Chief Marketing Manager Tata Sponge Iron Ltd

JHARKHAND (Ex-Mines) NIRMAL KUMAR PRADEEP KUMAR (Operated by Thriveni Earth Movers) ROM (58-60%)

Rs 3,200/MT

10-30 mm (62%)

Rs 4,950/MT

Fines (62%)

Rs 1,800/MT

Royalty Included, Taxes Extra

Mr. M. K. Sheshadri is hopeful that weakening Sponge iron prices and induction furnaces operating at minimum capacities, would regain previous levels, as steel demand looks to improve soon.

Excerpts: Sponge iron industry looks to be in a consolidation mode with falling prices and proposed hike in iron ore royalty rate. Where do you see the industry heading towards?

CHHATTISGARH NMDC BAILADILA 6-40mm (65%)

Rs 4,600/MT

10-150 (64%)

Rs 4,000/MT

Fines (63%)

Rs 2,610/MT

Royalty, Penatly/Bonus and Taxes Extra PELLETS (Ex-Raipur) 5-18 mm (63%)

Rs 9,000/MT

KARNATAKA NMDC DONIMALAI (E-Auction Bid Prices)

Sponge iron industry in India will be facing difficult situations in tackling low prices.

However, this will be a temporary situation as the domestic economy and steel consumption is expected to improve in the months ahead.

Offers have dropped sharply due to poor off take from secondary steel sector. As the prevailing prices are attractive for steel making, the demand in sponge iron will pick up.

In short term, there will be resistance for increase in prices, which should start rising with revival in demand.

Not many Sponge iron capacities are coming up in India.

Do you think, this is the end of making steel through DRI route? Many standalone Sponge iron units are also willing to sell their plant. What is your share of opinion?

In future, fresh capacities of Sponge iron in the country will be coupled with steel plants only, which is as per many Government policies.

Some of the standalone Sponge iron plants were built without proper planning and strategy. And now, they are bound to face problems due to change in market conditions.

Hence, the Sponge iron units are looking to sell out their plants.

Iron ore Lumps (63%)

Rs 4,281/MT

131

Fines (62.50%)

Rs 2,4750/MT

55

Royalty included, Forest Development Tax (FDT) & VAT Extra PELLETS (Ex-Bellary) 5-18 mm (62%)

Rs 7,350/MT

Iron Ore Insight

13 MAY 2013

Many steel mills remarked that due to rising power prices, using Sponge iron becomes nonviable. Hike in power prices have also forced induction units to cut their operations. Do you support the statement?

There is a cost increase in steel making due to hike in power tariff. However, Sponge iron prices have also adjusted to these increases. Apart from the input costs, it is the final product price which determines the viability of any operations. At few of the regions, production cut by furnaces has been reported. This is a temporary reaction and the furnaces will soon restart as the power tariff increases have been made across the country.

Upcoming Iron Pellet capacities in India will help Sponge iron units to survive. Also, increasing capacities of Iron Pellet and Sponge Pellet will result in further drop of Sponge iron prices. Do you agree?

Iron Pellet offered at competitive prices will prove to be an advantage for the Sponge iron industry. There is no correlation in increasing capacities of Iron Pellets and Sponge Pellet to account for further correction of Sponge iron prices. If there is substantial increase in Sponge iron production than the actual requirement in market, its prices might then get affected.

Monthly Avg Prices of 63.5/63 Iron ore fines, CNF China $160 CNF prices in $/MT

$150 $140

$153 $140 $137

$148

$140 $137 $132 $128

$120

$121

$113 $113

$100

$103

Apr-13

Mar-13

Feb-13

Jan-13

Dec-12

Nov-12

Oct-12

Sep-12

Aug-12

Jul-12

Jun-12

May-12

Apr-12

$80

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