NMDC in no hurry to cut iron ore prices

Says shortage due to mining ban in some states keeps domestic rates high, even as the commodity has softened globally

NMDC, the country’s largest iron ore producer, is not in a hurry to reduce domestic ore prices (for contractual buyers) in line with the fall in international prices.

Though NMDC’s in-charge chairman and managing director, N K Nanda said a price drop was being examined, the company’s board is unlikely to take a decision in this regard when it meets tomorrow.

Nanda told Business Standard the domestic prices of iron ore have remained steady, despite a decline in international prices. He attributed this to shortage of ore on account of bans on mining in different states.

In Karnataka last year, the Supreme Court allowed NMDC alone to operate its mines, to the extent of providing a million tonnes per month to the domestic steel industry.

The order had made it possible for the company to restart its Kumaraswamy mines (apart from the Donamalai mines) where mining was stopped for some time due to the high court order.

NMDC is also getting a higher rate than its benchmark price through e-auctions.

Nanda said the price being realised through e-auctions was almost 10 per cent more than its benchmark price, arrived by taking into consideration the international and domestic prices for over three months. Given this scenario, NMDC is unlikely to reduce prices. Even if there is a fall, NMDC sources earlier told Business Standard, it would not be ‘much’.

According to them, there could be ‘some reduction’ in the price of fines (Fe grade) but only a ‘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. The price of lumps in the international market is around Rs 7,000 a tonne, about Rs 1,500 less than the price during the second quarter of this financial year.

On the export front, the reduction in international prices does not have any impact on NMDC, as it is not exporting any ore this year. Its agreement pertaining to the export of ore to the Japanese market has expired and is yet to be revived by the Union cabinet.

NMDC accounts for 25 per cent of 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 was 100 million tonnes.