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State-owned miner NMDC Limited on Monday surprised markets by correcting iron ore lumps prices by Rs 200 per tonne for November. Lumps are now priced at Rs 4,400 per tonne from Rs 4,600 per tonne in October. The cut in price of lumps is due to slower demand for lumps in the previous month as well as to adjust to the imported iron ore, company sources said.
The company, however, has retained prices of fines at Rs 3,160 per tonne for November.
“The decision to reduce prices of lumps is due to a combination of factors. There was a severe disruption in the supply of lumps and fines during October due to Hudhud cyclone off Vizag coast that caused damage to the Kothavalasa and Kirandul rail line. The demand for lumps also went down in the recent days from the sponge iron makers. So, the company decided to cut prices as a feel good factor,” a company official said.
Also, the softening of steel prices over the last month and slowdown in iron ore lumps sales has influenced NMDC to take a cut in prices, he said.
During October, NMDC dispatches declined to 1.9 million tonnes compared to 2.2 million tonnes in September. The damage in rail line resulted in lower supplies during the month, the sources added.
For the first half of current financial year ended September, NMDC has sold 15.8 million tonnes of iron ore as against 13.75 million tonnes in the corresponding period last year, a growth of 15 per cent year on year.
NMDC has been facing pressure on its prices for quite some time, as international prices have come down from $110 per tonne in April to $80 per tonne in October for 62 per cent iron ore fines.
RINL and sponge iron makers are main buyers of iron ore lumps from NMDC.
However, NMDC’s move to retain prices of iron ore fines has disappointed Essar Steel, which is one of the largest buyers from the company.
“We are disappointed that NMDC has not reduced prices of iron ore fines like they have done on iron ore lumps. The steel industry is already impacted by cheaper imports and low demand conditions and some downward correction in fines prices was essential,” Essar Steel spokesperson said. Essar Steel buys around 8 million tonnes of fines from NMDC annually.
Sponge iron makers are witnessing slowdown in their sales from the billet makers in western states due to cheap import of scrap. The sponge iron makers had been demanding cut in prices of lumps for quite some time, analysts said.
“There has been a good demand for iron ore fines in the recent days. However, there was not much demand for lumps from the sponge iron industry. They preferred to buy imported scrap steel in place of lumps. However, there was a good demand from other quarters like Tata Steel and Tata Metaliks for iron ore from NMDC. The move to cut prices of lumps is little surprising,” said Prakash Duvvuri, head of research, Ore Team Research, a Delhi-based iron ore research firm.
He said NMDC has cut prices only to keep sponge iron makers happy. Also, the move would help RINL, which is yet to regain its full production in Vizag.
