NMDC cuts iron ore prices as demand dips

05 December 2014

State-run National Mineral Development Corporation (NMDC) has reduced the price of lumps and fines by Rs200 and Rs100 per tonne effective this month amidst falling global prices and lower demand.

The price of iron ore lumps Fe 65.5 per cent from Kiraundal region has been reduced by Rs200 (4.5 per cent) to Rs4,200 per tonne for November sales ex-mine. With royalty paid to states estimated at 15 per cent, the price works out to Rs4,830 ($78) per tonne.

Against this, global iron ore prices have nosedived to five-year low of around $70 per tonne, mainly because of subdued demand from China, the largest consumer of iron ore in the world.

The price of lump ore, which has more iron content and is used mostly by domestic steel makers, now stands at Rs4,200 per tonne, while the fines, having less content of iron or the inferior grade, now costs Rs3,060 per tonne.

NMDC, which reviews iron ore prices every month on the basis of global prices and domestic demand, had not changed rates during the July-October period.

This, coupled with shortfall in domestic production had forced steel majors like JSW Steel and Essar Steel, major customers of NMDC, to import the raw material over the four-month period.

With the country's top miner cutting prices, other miners are also expected to cut iron ore prices to the benefit of both domestic steel firms and importers in China, Japan and Korea.

The demand for iron ore has also come down in line with the fall in steel production.

NMDC's sales in October actually fell from the previous month even as its sales in first seven months of current fiscal rose to 17.65 million tonnes against 16.03 million tonnes during the corresponding period last year.
Domestic crude steel production also declined by 0.5 per cent in October, 2014 from the previous month, mainly by a decline of 0.9 per cent in production by major producers and a 0.1 per cent decline in production by non-major producers.

The price cut might impact NMDC's net sales realisation a little during the current quarter, although it is confident of improving the bottom-line for the entire fiscal.

NMDC, however, reported a net profit of Rs3,482 crore for the first two quarters of the current fiscal, against Rs6,420 crore net profit for the full 2013-14 fiscal.

The company also hopes to improve its sales volume to around 32 million tonnes during the current fiscal.

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