Iron ore passes through screening machinery at Fortescue Metals Group Ltd.’s Solomon Hub mining operations in the Pilbara region, Australia. (Photographer: Brendon Thorne/Bloomberg)

NMDC Cuts Prices For Second Time In A Month Amid Mine Issues

India’s largest iron ore miner cut prices for the second time in less than a fortnight in December as it looks to protect volumes and regain market share.

NMDC Ltd. lowered prices of lumps and fines by 8 percent each—the highest in more than a year—to Rs 3,250 a tonne and Rs 3,860 a tonne, respectively, according to the company’s filings. The new prices are effective Dec. 13. The miner had reduced the prices of lumps by 8 percent and fines by 6 percent on Dec. 1.

The two consecutive cuts offset the 15 percent and 12 percent hike in the price of lumps and fines in September. NMDC’s prices have now rolled back to the level seen in July 2018.

A decline in spreads—the difference between the cost of raw material and selling price—across longs products, price cuts by other miners in Karnataka and Odisha, and an effort to gain share in the sponge iron market in Chhattisgarh led to a price cut, according to a note by Edelweiss.

This may also help the company to protect it sales volume that, according to company’s filings, fell 12.5 percent over the previous month in November.

Edelweiss, however, said NMDC’s cuts should halt until international prices go down or domestic longs prices come under additional pressure.

Iron ore spot prices on cost and freight basis—where the seller must arrange and pay for transporting the cargo to a specified destination—rose to $70 a tonne as on Dec. 14. That’s higher than $66 a tonne seen in the September quarter.

Donimalai Issue

NMDC filed a case against the Karnataka government for claiming larger share of revenue from sale of iron ore from the Donimalai mine in the state, Business Standard had reported. The matter is scheduled for hearing on Jan. 10 at Karnataka High Court.

BloombergQuint awaits replies to emailed queries sent to the company and Karnataka mining secretary.

JPMorgan said NDMC’s Donimalai mine lease renewal in Karnataka has become more difficult as no other state companies have paid a larger premium for lease renewal in the past. “There’s a long legal route ahead as well as a possibility of production being lost from the Donimalai mine.”

TRK Rao, chairman and managing director of NMDC, had earlier told BloombergQuint that an 80 percent premium for the lease renewal was not viable for the company.

Sales from Donimalai form 30 percent of NMDC’s overall revenue, according to BloombergQuint’s calculations.

Of the 20 analysts covering the stock, 15 have a ‘Buy’ and the Bloomberg consensus target implies a potential upside of nearly 38 percent.

Also read: Closure of NMDC’s Donimalai Mine Will Have Limited Impact, Says JSW Steel