BANGALORE (Commodity Online): The Steel industry in Karnataka has expressed concern over the unrealistic reserve prices fixed by National Mineral Development Corporation (NMDC) for the e-auction conducted through Metal Scrap Trading Corporation (MSTC).

The electronic auction of Iron Ore commenced on Wednesday the 14th September, 2011.

According to Bangalore Chambers of Commerce, the reserve price is fixed disregarding the prevailing market prices for similar grades in view of the scarcity of the material in the market and the dire need of the steel industry. Unfortunately, while the Industry awaited the e auction eagerly the arbitrary fixation of reserve price for low grade iron ore deterred the steel companies to bid for this ore.

The industry sources says that the mechanism adopted for fixing the base price for low grade iron ore seems to be on pro-rata basis as against the market practice.

As per the international practice, the difference in the prices for every 1% Fe is approximately USD 6 per ton of iron ore as low grade iron ore fines (Fe-60% and below) have to be beneficiated before usage in Steel manufacturing. Beneficiation process does not recover the 100% Fe and results in loss of more than 30% of the input quantity of Iron ore.

More over additional fuel in the form of metallurgical coke is required for using low grade fines. This is why in the international market a discount of USD 6 per ton is offered for every 1% difference in Fe percentage.

However in the just concluded auction process a discount of only Rs 162 (USD 3.39) was provided for 6.1% Fe i.e. $0.57 (US) for every percent falls in Fe.

Upon evaluation it is noticeable that more that 75% premium on low grade Iron Ore is charged in comparison to that of NMDC.

Many of the small steel and sponge industries have been closed down and some are working with reduced capacity as the iron shortage is high in the region after the ban of iron ore mining by Supreme Court in view of the illegal mining in the region.

The Apex Court later allowed e-auction of existing stock lying the mining region due to acute shortage of ore faced by steel industry. Karnataka accounts for more than 25% of country’s total output.