We may revise iron ore prices further, says NMDC CMD Sumit Deb

The lockdown hit our iron ore production and despatches in the first two months of 2020-21, he says

Improvement in the working of the steel industry has created an ideal condition for the country’s largest iron ore miner, NMDC, to raise the price of iron ore fines and lumps, NMDC Chairman and Managing Director Sumit Deb tells Kunal Bose. Edited excerpts:

What is the impact of the Covid-19 pandemic on NMDC and how are you ensuring things stay as normal as possible?

The lockdown hit our iron ore production and despatches in the first two months of 2020-21. Labour shortages and major disruptions in supply chain made that inevitable. How could we as a supplier of steelmaking ingredient be spared the impact of muted demand in all major end-use sectors, from construction to automobile?

Our primary focus is to support the domestic steel sector, particularly the small and medium sponge iron units that are faring badly due to the pandemic. NMDC has taken an informed decision to calibrate iron ore prices so that steelmakers are spared some avoidable pains. Through the challenging times, NMDC has kept itself ready to produce enough in line with any demand pickup. There is continuous improvement in production since April, when iron ore output was down 65 per cent year-on-year. By mid-August, production equalled 90 per cent of what it was in the same period in 2019-20.

Considering that labour issues and logistical challenges are unlikely to be over anytime soon, will NMDC be able to achieve this year’s production target of 33 million tonne (mt)?

The demand for steel will rise, especially in the post-monsoon months. The stimulus programmes linked to infrastructure, construction and housing development will boost the use of steel and that, in turn, will create a condition for steelmakers to operate at a high capacity. They will need more iron ore. We are geared to fulfil our production target against actual 2019-20 output of 32.4 mt.

What explains the 2019-20 dip in production, sales and profits?

Our production and sales were impacted over nine days of the final month of 2019-20, constituting 2.5 per cent of working days in a year. Production was down 1.5 per cent, while sales were lower by 2.5 per cent. Mind you, we had to put up with the suspension of operation at the Donimalai mine in Karnataka. NMDC is in talks with the state government and New Delhi for the opening of the mine, and we are hopeful of it happening soon. Once Donimalai becomes operational, NMDC’s production and sales will rise by more than 20 per cent. The decline in profit last year is partly due to ore price reduction and partly because of dip in despatches.

Iron ore globally is behaving like a boom-time commodity in a recessionary situation. Will this trend continue for the rest of the year?

Supply disruptions in Brazil, a major iron ore producer, have helped prices. April onwards, the demand in China, which alone makes for two-thirds of the global seaborne trade in the commodity, has been strong enough to more than offset the lukewarm demand from the rest of the world.

India is a net exporter of iron ore. However, it has a meagre 2 per cent share in global exports. So we don’t make any significant impact on international prices. Neither do world prices leave a meaningful impact on our domestic market. NMDC had reduced the price of fines and lumps twice, in April and May 2020, to support steelmakers. Now, since the conditions have turned favourable with steel prices behaving better, we have raised ore prices. We may revise prices further, depending on how the steel sector works.

India has a steel capacity target of 300 mt by 2030-31. What about NMDC?

NMDC will remain the country’s leading iron ore miner at all times. It has a target to enhance production capacity to 67 mt by 2025 through the expansion of existing mines and by way of venturing into new green and brownfield projects. The company is in the process of mine production supporting infrastructure development, including construction of slurry pipeline and doubling of rail line between project locations and nearest ports. By 2030, NMDC’s capacity will exceed 100 mt. Iron ore-rich Odisha and Jharkhand are the target states for acquisition of new deposits. Incidentally, the two states lie in a zone that hosts more than 40 per cent of the country’s total crude steel capacity.