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For the month of October, NMDC has maintained prices at Rs 4,600 per tonne for lumps and Rs 3,160 per tonne for iron ore fines, same as September. Whereas the prices in international markets have declined to $75-77 per tonne for 63% Fe grade fines and $83 per tonne for lumps.
"There is no relation between NMDC prices and international prices. We have our own price mechanism and depending upon demand and supply in the country we fix our prices. Our prices are market driven," NMDC Chairman and Managing Director Narendra Kothari told Business Standard recently.
Stating that the demand is robust for iron ore in the domestic market, he said the company is well on course of increasing production to around 33-35 million tonnes from across its mines, an increase of 10% more than last year. "We are not decreasing our production. Instead, we are increasing our production. We are not going to stock it. We will sell everything," he said.
NMDC has more than one reason to retain its prices at current levels. The demand for iron ore is quite robust in the domestic market mainly from DRI (direct reduced iron) producers and steel mills as production is yet to return to normalcy in Karnataka, Odisha and Jharkhand. In the eastern sector, even steel mills having their captive mines are buying from outside like Tata Steel and SAIL.
The company, however, effect a cut in prices to the tune of $15 per tonne for export markets. It exports iron ore to Japan and Korea.
"We do not see any big change in the production of iron ore in the country in the near future. Most of the states are going through problems. There is no clarity yet on when the mines will fully reopen in Odisha. Under these circumstances, NMDC is unlikely to take any production cut during the third quarter," Prakash Duvvuri, Head of Research at OreTeam, a Delhi-based iron ore research firm said.
During the first six months of the current fiscal, NMDC has produced 14.88 million tonnes of iron ore, a growth of 15.7% over the corresponding period last fiscal. For the full year, NMDC expects 25.5 million tonnes of iron ore volume from Chhattisgarh and 9.5 million tonnes from Karnataka.
I"t makes sense to import only for port based plants like JSW for their Dolvi plant in Maharashtra and RINL for Vizag plant can import. However, NMDC wants its material to be lifted and in the long term, they cannot afford to retain their prices. They have seen decline in their dispatches in the month of September. They might take a cut in prices sometime in November or December," Giriraj Daga, Senior Research Analyst (Metals & Mining), Nirmal Bang Equities Pvt Ltd said.
International iron ore prices declined to a five-year low, in the range of $83- $84 per tonne (CFR), down 16% in the past two months and 30% from April 2014. However, NMDC prices are currently 2% and 9% higher for lumps and fines respectively from April 2014.
"NMDC prices are ex-mine prices and, therefore, the increased royalty payment - from 10% to 15% - is also borne by the customers. This has made NMDC's iron ore prices incompetitive in the domestic market," Daga added.
