Odisha Likely To See Limited Participation In Iron Mine Auctions

Odisha is expected to auction eight Iron ore mines with total reserves of 573 million tonnes (mt) later this month but might see limited participation this time around due to inflated bidding prices.

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

Odisha has produced around 114mt of ore in 2018-19, more than half of India’s total output. Keeping in mind Odisha’s vision of 2030, this auction plays a vital role in achieving it. By the records, 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, whereas in the recent auctions of Karnataka and Maharashtra, average bid price comes to 85.92%.

“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.”

Crisil Research is positive about higher bidding because of Odisha’s better quality of Ore. India’s crude-steel making capacity is based on the eastern belt hence, large steelmakers are expected to actively participate in the auctions.