Domestic iron ore prices are set to escalate between 30 and 40 per cent after mining commences again from the lapsing merchant blocks in Odisha following the successful conduct of online auctions.
A study by Crisil Research illustrates that premium for most of the mines would exceed 40 per cent in a majority of the mines put up for auctions. The assumptions are based on the reserve price set by the Odisha government for auctions of iron ore blocks.
The floor price for almost all blocks, except Nuagaon, ranges from 15-35 per cent of the sale value of the mineral as estimated by Indian Bureau of Mines (IBM), according to a report in Business Standard. For Nuagaon block, which is currently under the leasehold of KJS Ahluwalia, the reserve price is pegged at 50 per cent as it contains immense deposits of 790 million tonnes (mt).
The hike in iron ore prices in the aftermath of auctions will hinge on the auction premiums. Last year, domestic prices were half the landed prices, offering the merchant iron ore producers the latitude to raise prices.