Singapore (Platts)--20Dec2012/540 am EST/1040 GMT

Demand for iron ore lumps and calibrated lump ore in electronic auction sales in India's southern state of Karnataka has remained lackluster in the past few months as buyers turn to lower-grade fines to meet their needs, data from the state's mines ministry showed Thursday.

Indian state-owned miner NMDC Ltd. sold only 4,000 mt, at Rupees 4,702/mt ($85.9/mt), of 100,000 mt of 64% Fe CLO it offered at auction Wednesday, the data showed.

About 60,000 mt of NMDC's iron ore lumps with 63.23-63.51% Fe content were also up for sale. Of this volume, about 20,000 mt found no takers.

Of all the iron ore fines stocks on offer, about 280,000 mt were purchased. JSW Steel acquired 204,000 mt, or more than 70% of the total, data showed.

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Bid prices successfully posted by the steelmaker ranged from Rupees 2,285/mt ($41.7/mt) for 28,000 mt of 63% Fe fines from NMDC's Kumaraswamy mine to about Rupees 2,016/mt ($36.8/mt) for 20,000 mt of 59.16% Fe fines from the miner's Donimalai mine.

Barring supplies from NMDC, iron ore stocks available at other mineheads in the state are also being offered in the auction sales but these are of much lower grades.

For instance, in an auction Tuesday bidders purchased about 384,000 mt of low-grade iron ore fines and run-of-mine with Fe content averaging 45% and lower.

Among other bids, JSW Steel purchased about 184,000 mt of fines with 40% Fe and lower at about Rupees 300/mt ($5.5/mt) on Tuesday.

"Steelmakers do not have a choice," a Karnataka-based iron ore miner said. "They are grabbing whatever ore they can get."

As reported, dwindling iron ore supplies and delays in the restart of mining operations continue to pressure steelmakers and sponge iron producers dependent on ore supplies from the state. Buyers have previously said that barring supplies from NMDC, ore stocks being auctioned are of inferior quality, with low Fe content and high levels of alumina and silica.

All prices are on an ex-mine or ex-stockyard basis. A 10% royalty, 5.5% VAT, and 12% forest development tax are extra.

--Anitha Krishnan, anitha_krishnan@platts.com
--Edited by Jonathan Fox, jonathan_fox@platts.com

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