en.Wedoany.com Reported - In the week ending June 4, the iron ore market in Karnataka showed a clear divergence, with high-grade iron ore prices rising due to tight supply, while low-grade ore remained largely stable, reflecting weak downstream steel demand.

Fe 57% fines continued to hover around INR 2,750/tonne ex-mine, while benchmark Fe 62% fines rose by INR 100/tonne week-on-week to INR 5,000/tonne, driven primarily by a severe shortage of high-grade ore rather than an improvement in underlying steel demand.

National Mineral Development Corporation (NMDC) has raised its Long-Term Agreement (LTA) prices by INR 200/tonne ($2/tonne), further supporting the price increase.

In recent months, iron ore dispatches from NMDC's Kumarswamy mine have slowed significantly, with auction volumes and production both declining, and dispatches nearly halved compared to normal levels.

Limited availability of high-quality ore, coupled with a lack of sustained auctions by major miners, has strengthened the premium for high-grade fines. Consumers reliant on high-quality raw materials have limited procurement options and are forced to accept elevated price levels, despite weak conditions in the finished steel market.

Several sponge iron producers have cut output or temporarily halted production, citing unsustainable production economics. Market participants indicate that operating plants under current raw material costs and finished product prices is barely commercially viable, prompting producers to prioritize cost control over output maximization.

Auction activity remained largely subdued this week, limiting market liquidity. Limited availability of auction material further tightened supply of high-quality ore in the spot market. Industry participants expect auction volumes to improve in the coming weeks as miners prepare inventory for sale, which may provide clearer signals on buyer acceptance and current market sentiment.

Low-grade ore continues to face demand challenges, leading to weaker auction participation.

During this reporting period, no Fe 57% was recorded as sold through electronic auctions, resulting in a 0% weight for the T1 transaction category. A total of 14 offers and indicative prices were reported, of which 8 were considered T2 transactions and received a 100% weight.

Sponge iron (C-DRI) prices in the Bellary region fell by INR 550/tonne ($6/tonne) week-on-week to INR 26,600/tonne ($278/tonne), weighed down by weak buying interest due to sluggish demand from the finished steel sector. Market sentiment remains bearish, as lackluster downstream consumption continues to drag on sponge iron procurement activity.

Iron ore prices in Karnataka are expected to remain firm in the near term, supported by the persistent scarcity of high-grade material and recent price hikes by miners. However, weak demand from the steel and sponge iron sectors may limit any significant upside. The outcomes of these auctions will be crucial in determining whether the current price strength can be sustained amid ongoing demand-side challenges.

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