Iron ore per tonne price drops; Industry says low price and high taxes will not make mining viable
PANJIM: With prices of low grade iron ore in the international market dropping by 50 percent from a recent peak of $94.5 (Rs 6050 approximately) per tonne, the biggest worry for the Directorate of Mines and Geology (DMG) is the sale of the yet to be e-auctioned and also already auctioned ore, as bidders are not interested in lifting the mineral at this stage.
“Bidders are not coming forward for e-auction. Due to the falling international prices, the demand for low grade ore has declined. We hope that in the new season, the situation improves. The already auctioned ore is also lying at the sites,” sources in DMG said.
“At this stage, the business is not profitable for us. If we lift the e-auctioned ore, which is low grade, where will we sell it? The amount of ore is low and on top the international prices are at lowest, under such situation, we are at loss,” a bidder, on request of anonymity, said.
After initially capturing the international markets with its low grade iron ore supply, Goa, is now struggling to retrieve its lost market. China, a major
consumer, procured better quality ore from Australia to feed its integrated steel plants, taking advantage of a slump in global prices.
The e-auction process that commenced in February 2014, has also often failed to attract buyers. But it was hit hard in last two e-auctions held in May, wherein of the 3.24 million tonnes of ore identified for sale, only 99,390 tonnes of ore were bid for.
The ore price which was at $94.5 per tonne till February, has now dropped to $45-$50 (Rs 2880-Rs 3200 approximately) per tonne. As such the market for low grades is getting tough, as most steel mills are focusing on higher grades to increase productivity.
When contacted, mine owner Harish Melvani said that the price of low grade iron ore is on the decline. “For 58% Fe content with 1.50% alumina and 2.50% silica it is around $45 per tonne landed in China,” he explained.
He said that with payment of royalty, contribution to district mineral fund, Goa iron ore permanent fund, cost of mining, cess, the profit margin is also very slim and the business is not viable at all.
Of the total 15.5 million tonnes of ore identified for e-auction, only 11.2 million tonnes of ore has been sold. Government has earned revenue of over Rs 1500 crores. The new mining season is slated to commence in October.