Search: News Price
Home |  Register |  Price Index  |  Publication |  Consultancy |  Data |  Events |  Enquiry |  Language
Mar.29.2024 1USD=7.095RMB
  SteelHome >>Raw Material>>Market Info>>International Dynamics
 
Odisha Iron Ore Mine Auctions Unlikely to See Aggressive Bids

https://en.steelhome.com [SteelHome] 2019-08-16 13:06:08

share to social network site
Upcoming iron ore mine auctions in Odisha might see muted participation from steel makers worried about high bid expectations, company executives said. The state will auction eight mines with total reserves of 573 million tonnes (mt) later this month, according to reports.

Top steel makers will need additional ore since they are all expanding and buying insolvent assets, said Pankaj Satija, chief of regulatory affairs, Tata Steel, and chairperson, raw materials sub-committee, Indian Steel Association. Tata Steel itself is expanding its Kalinganagar plant in Odisha and needs more ore for Bhushan Steel Ltd that it recently acquired.

Odisha produced around 114mt of ore in 2018-19, more than half of India’s total output. “So, the Odisha auctions are going to play a major role in meeting the current and future iron ore requirements for the large steel companies. Going by the past records of auctions for iron ore blocks in India, we have seen the lease being acquired for a premium of 44.35% and the highest offer in subsequent rounds touching as high as 275%. The average bid price in 2016 for iron ore blocks in India was 86.5%, which increased to 93.6% in 2017 and 100.2% in 2018. In 2019, if you look at the recent auctions of Karnataka and Maharashtra, average bid price comes to 85.92%.

The impending auction of iron ore blocks in Odisha will not be much different and companies will try to ensure raw material security for long-term sustenance," Satija said. There are also concerns on how quickly the new lessee can start production, he added.

The bid premium is a percentage of the average monthly price of grades of iron ore, published by Indian Bureau of Mines. The mine is awarded to the highest bid premium offer.

“Steel demand has slowed down and the economy is on shaky ground," a JSW Steel Ltd official said on condition of anonymity. “JSW Steel will not be aggressively participating in the Odisha auctions and we are not willing to pay an excessive premium for the mines, unlike what we did for the Karnataka blocks. I don’t think we will cross at 25-30% bid premium threshold."

The company recently acquired three mines in Karnataka, with an average bid premium of 78.88%.

“When we bid, we only go up to an extent," said Manish Kharbanda, executive director, Jindal Steel and Power Ltd (JSPL). “We make sure that whatever we take, we operate. We have 6mtpa (million tonnes per annum) capacity in Angul, which we want to scale up to 12mtpa. For this, we do require captive iron ore. We also have a 9mtpa pellet plant in Odisha and 3mtpa of integrated steel production. We will look at 2-3 large mines but we will be pragmatic in our bidding."

“Mines in Odisha will attract higher bid premiums because of the state’s better quality of ore," said Hetal Gandhi, director, Crisil Research. “Since more than half of India’s crude steel-making capacity is based in the eastern belt, we expect significant participation from large steel makers in the region, smaller sponge iron and pellet makers and merchant miners. In the last two years, we saw Bhushan Steel pay a 100% bid premium in Odisha, Bhushan Power and Steel bid at 87% while Essar Steel won offering 44%," Gandhi said.

“The capital cost for developing iron ore mines in Odisha is much higher compared to other states due to the imposition of the recommendations by National Environmental Engineering Research Institute (NEERI) which prescribes setting up of slurry pipeline or railway siding or conveyor for mines that produce more than 5 million tonnes," the JSW official cited earlier said. “Almost every mine in Odisha has a production capacity of more than 5 mtpa. This calls for not only huge capital investment but also execution risks apart from logistics constraints in Odisha."

“We’re also concerned on how soon the new lessee can start production once the licence is awarded," Satija of Tata Steel said. “The current non-captive licences expire in March 2020, but what’s the guarantee that the new lessees can start production from April 1? You cannot start production unless you have environment and forest clearances. In the past, we have seen cases where production couldn’t start for at least four years after the licence was awarded. If this process takes as long this time around, we will see a quarter of the iron ore supply getting disrupted, impacting steel production. We are hopeful that the central and state governments would facilitate to the extent possible to make the transition as seamless as possible with positive policy interventions."

Source: LiveMint
Related News
Search
News Price
Hot Topics
Latest Update
Most Viewed
上海市通信管理局
沪B2-20040629
Copyright© 2004-. SteelHome.com. All Rights Reserved
Shanghai SteelHome Information Technology Co., Ltd    Tel: +86) 021-50585733, 50585358    Fax: 021-50585277