National Mineral Development Corporation (NMDC), the country's largest producer and exporter of iron ore, has reduced ore prices by 25 per cent, with effect from December 1. A decision to this effect was taken by the public sector undertaking's board at its meeting held on Thursday.
NMDC Chairman and Managing Director Rana Som told Business Standard that the prices of the iron ore would now go down by Rs 470 to Rs 1,150 per tonne depending on the quality. While the price of ore fines would decline by Rs 470 a tonne, the prices of calibrated lump ore (CLO) and direct reduced calibrated lump ore (DRCLO) would decrease by Rs 860 and Rs 1,150 a tonne, respectively.
The prices have been slashed "basically to help the steel sector come out of recession", he said.
NMDC sells iron ore under long-term contracts to Vishakhapatnam Steel Plant, Essar Steel, JSW Steel, Ispat Industries, Vikram Ispat and dozens of smaller firms. The reduction in prices of iron ore, the main raw material used to produce steel, is expected to help these steel makers increase their profit margin and might also lead to a cut in steel prices.
NMDC had increased lump prices for long-term contract by 33 per cent while that of CLO and DRCLO by 36 per cent and 40 per cent, respectively. It also raised the rate of iron ore fines by 10.5 per cent in October.
On the other hand, the international spot prices of iron ore have come down to about $50 a tonne from a high of $175 a tonne in July. Resultantly, the contract prices of iron ore also came down putting pressure on NMDC, which sells mostly through long-term contract.
In the financial year ended March, NMDC's iron ore output was 30.6 million tonne, nearly all of which was sold under the long-term contract. Of its annual iron ore production, the navratna PSU exports around 3.5 million tonne. The company accounts for about 15 per cent of iron ore production in India and operates three mines, two in central Chhattisgarh and one in Karnataka.