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NMDC’s Iron Ore Price Hike Is The Steepest In Seven Months

NMDC raised the prices of iron ore by Rs 250 a tonne—the sharpest hike since September 2018.



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

India’s largest iron ore miner increased prices the most in seven months in May at a time global rates of the key raw material in steelmaking are hovering near their five-year highs.

NMDC Ltd. raised the prices of iron ore by Rs 250 a tonne—the sharpest hike since September 2018—on the back of robust demand, said TRK Rao, commercial director at the company. That’s also in line with the hikes in Chhattisgarh and Karnataka, he told BloombergQuint.

The miner raised the prices of fines by nearly 10 percent over April to Rs 2,860 a tonne this month, the highest since December last year, according to its exchange filing. It raised the prices of lumps by about 9 percent to Rs 3,100 a tonne. Barring the latest hike, NMDC from the start of January had cut lumps and fines prices by Rs 400 and Rs 250 a tonne. Prices of the raw material were lowered twice in December last year.

Falling inventory and higher sales despite rising global iron ore prices prompted the company to increase domestic rates, Rao said.

Still, the domestic prices of iron ore are trading at a discount to global rates on a landed basis—imported price inclusive of all duties. NMDC’s prices in the east and west, according to Rao, are trading at a 40 percent and 22 percent discount to the imported prices.

Global iron ore prices rose after Brazil’s Vale SA suspended operations at its 30-million-tonne Brucutu mining complex. Earlier, the world’s largest miner of the bellwether commodity had decommissioned all its upstream units after a fatal dam disaster, impacting 30 million tonnes of output. Vale now expects production of the raw material in 2019 to fall to the lower end of its previous guidance of 307-332 million tonnes, according to a press statement. Other producers, too, slashed their output targets for the year.

Even in India, 33 mining leases are set to expire in March next year. Any delay in auction of the licences would disrupt a third of iron ore supplies to domestic steel mills, increasing the risk of a further rise in prices of the raw material. But analysts from CARE Ratings and Crisil shrug off concerns over any delay in auction, if any, as they expect the mines to generate a surplus before the leases expire.

Impact Of Price Hike

Though NMDC raised prices, which is a positive, this comes after a month’s delay to its regional peers and is also lesser compared to them, according to Amit Dixit, assistant vice president (institutional equities) at Edelweiss Research. Miners such as Serajuddin and Essel Mining & Industries in the nation’s largest iron-ore producing state of Odisha increased prices by Rs 300 a tonne led by robust domestic steel demand and limited imports owing to higher global prices, he said.

Besides, NMDC’s stock is unlikely to witness any strong positive momentum as operations remain suspended at its Donimalai, Karnataka mine, Dixit said.

This price hike may also not augur well for partially or non-integrated steelmakers like Jindal Steel & Power Ltd. and JSW Steel Ltd. as they source their raw material.

But Seshagiri Rao, joint managing director at JSW Steel, doesn’t expect any cost inflationary pressure on the company in the near term. That’s because iron ore prices are likely to normalise in the second half of this calendar year to below $80-a-tonne mark compared with $100 now, he told BloombergQuint during the March-quarter earnings review of the company.