Steep iron ore floor prices at e-auctions of state run Odisha Mining Corporation (OMC) drew a tepid response yet again with buyers questioning the miner's reluctance to cut its prohibitive floor price for lumps and fines.

In the last auctions conduced on August 11, OMC kept its floor price for lumps in the range of Rs 2400-2500 a tonne, a shade lower than Rs 2600 per tonne that it offered in the July auctions. OMC has stuck to its high pricing regime despite repeated pleas by end use industries to slash prices in the wake of plunging international ore prices.

"Today, international raw material prices are at the level of 1999. Iron ore prices have fallen to the level of $50-55 a tonne. This apart, the domestic steel prices are at 2005 level. Iron ore prices are continuing to rule high at a time when the steel industry is running into losses. Pellet manufacturers across the country are operating at only 35% of their rated capacities. This is the right time for the state government to intervene and make correction in pricing since the current pricing will not be sustainable for long", said N D Rao, managing director at Brahmani River Pellets Ltd (BRPL) and president, Pellet Manufacturers' Association of India (PMAI).

In the last auctions, OMC offered 150,000 tonne of calibrated lump ore from its flagship Daitari mines. But only 19% of the ore was booked due to the high floor price of Rs 2,450 per tonne. Similarly, out of 70,000 tonne of lumps auctioned from Gandhamardhan mines, a measly four% was booked.

The Indian Chamber of Commerce (ICC) feels the high floor prices has deterred steel units from bidding.

ICC has sought the intervention of chief minister Naveen Patnaik to correct OMC's unacceptably high ore prices. The industry body pointed out that despite directives by the chief minister, the floor prices have not been corrected in tune with market dynamics.

"OMC is earning very high profit margin whereas the profit margin of steel companies sourcing the iron ore from OMC is negligible or negative and not even sufficient to service the interest cost, let alone loan repayment. Hence, OMC needs to further reduce the floor price for iron ore", ICC's Odisha State Council said in the letter to the chief minister.

ICC feels the arbitrary fixation of floor price by OMC during iron ore e-auction has created a lose-lose situation for the mining company and the steel industry. OMC's stockpile of iron ore (both lumps and fines) has moved up from 5.54 million tonne in October 2014 to 6.5 mt in July this year.