NMDC unlikely to reduce ore prices

NMDC Limited, the country's largest iron ore producer, is not in a hurry to reduce domestic ore prices in line with the drop in international prices.

Even though NMDC's in-charge chairman and managing director, N K Nanda, was saying that the price drop was being examined, the company's board is unlikely to take a decision in this regard when it meets on Tuesday.

Nanda told Business Standard that the domestic prices of iron ore remained steady despite a decline in international prices. He attributed this to shortage of ore on account of ban on mining in different states and the imposition of 30 per cent import duty.

In Karnataka last year, the Supreme Court allowed NMDC alone to operate its mines to the extent of providing 1 million tonnes per month to the domestic steel industry. The order of the apex court had made it possible for the company to restart its Kumaraswamy mines also ( apart from Donamalai mines) where mining was stopped for quite some time due to Karnataka High Court order.

NMDC is also getting a higher rate than its bench mark price through e-auctions. Nanda said that the price being realised through e-auctions was almost 10 per cent more than its bench mark price arrived by taking into consideration the prevailing international and domestic prices for a period of three months.

Given this scenario, NMDC is unlikely to reduce prices. NMDC sources earlierhad told Business Standard, that even if there is a drop, it would not be "much".

According to them, there could be "some reduction" in the price of fines (Fe grade) but "very marginal" drop in the price of iron ore lumps which have a good demand in the domestic market.

Currently, NMDC is selling lumps at around Rs 5,000 and Fe grade ore at Rs 3,300 a tonne. On the other hand, the price of lumps in the international market is hovering around Rs 7,000 a tonne, about Rs 1,500 less than the price prevailed during the second quarter of this financial year.

On the export front, the reduction international prices of ore do not have any impact on NMDC as it is not exporting any ore this year. It's agreement pertaining to the export of ore to the Japanese market has been expired and it is yet to be revived by the Union Cabinet.

NMDC accounts for 25 per cent of the total iron ore consumption in the country. In 2010-11, the Navaratna company had sold 23.75 million tonnes of ore, while the total requirement of domestic industries stood at around 100 million tonnes.