Subdued demand hits NMDC; cuts iron ore rates by 30% since Jan

State-owned NMDC has slashed the prices of lumps or higher grade of iron ore by as much as 30% since January to Rs 2,950 per tonne for the current month on the back of subdued demand in the domestic market.

The country's largest miner for the metal, used in the production of steel, had kept lump ore prices unchanged in January 2015 from December last year at Rs 4,200 per tonne.

In the case of iron ore fines, the price revision is steeper by 46%. For July 2015, NMDC has put the price of iron ore fines at Rs 1,660 per tonne against Rs 3,060 per tonne in January this year.

The public sector undertaking had fixed lump ore prices at Rs 3,050 per tonne, Rs 3,250 per tonne and Rs 3,750 per tonne in April, March and February, respectively this year.

While, fines were 1,960 per tonne, Rs 2,460 per tonne and Rs 2,760 per tonne in April, March and February, respectively.

For the period ended June 30, 2015, NMDC said its iron ore production stood at 5.93 million tonnes (MT), while sales were 6.65 MT. It did not provide figures for the corresponding period in 2014.

However, iron ore production fell by 16% to 4.14 MT in April-May of 2015-16 fiscal from 4.94 MT during the same period in 2014-15. While, sales fell by 21% to 4.54 MT from 5.74 MT during the reported period, it said last month.

The mining giant had reported a 31% fall in its net profit to Rs 1,347 crore for the quarter ended March 31, 2015. While, total income fell 27% to Rs 2,829 crore in the January-March quarter of 2014-15.

In the January-March quarter this fiscal, NMDC's iron ore production stood at 7.94 MT against 9.96 MT in the year-ago period.

According to a senior executive from a steel major: "Iron ore prices were in the range of $ 68-70 in December 2014. Since then they have been declining from $ 66-67 per tonne in January 2015 to $ 62-64 (February), $ 56-58 (March), $ 51-53 (April). In May, the prices inched up to $ 61-63 but, June rates again declined to the $ 58 range."

While the global demand is going down, particularly in China, production is not slowing, there is lot of inventory in the market and it is impacting the prices of iron ore and steel, he added.

"Indian situation is no different. Many steel producers had been importing cheap iron ore from global market. Now the government has allowed iron ore mining in Karnataka and Goa, which will would effectively start production only by October due to monsoons," he said.

However, a market analyst said NMDC's rates for July are competitive considering iron ore prices at China's Tianjin port were last are trading at around $ 58.90 a tonne.

"It is expected that the sales will pick up with this price point. But there can be an issue as global iron ore prices are predicted to soften further and may even hit $ 50 per tonne range by the year-end," he added.