NMDC (Chhattisgarh) iron ore prices have witnessed reduction since May’16, however in Aug’16 the miner had rolled over the prices over decent dispatches. But it would be interesting to see if factors like – rising iron ore prices in global market, increased demand from domestic manufacturers and less production owing to monsoons will lead to any increase in NMDC’s iron ore prices for next month.
SteelMint has tried to analyze the factors that may govern NMDC’s iron ore prices for next month.
1. Increasing demand from domestic manufacturers – Apart from regular buyers who source iron ore from NMDC’s Bailadila mines in Chhattisgarh, west coast based steel makers have also started procuring material. Recently SteelMint had reported that Gujarat based Steelmaker Starts Sourcing Domestic Iron Ore from NMDC instead Imported.
As per railway movement data tracked by SteelMint, JSW Steel has procured around 37 rakes from NMDC (C.G.) in Aug’16 (till 22 Aug’16) against 65 rakes in Jul’16. However market sources mentioned that dispatches have been impacted owing to monsoons.
2. Production falls over monsoons – Production has suffered a set back over monsoons. In Jul’16, NMDC produced 1.92 MnT iron ore against 2.64 MnT in Jun’16. Thus witnessing a fall of 27% M-o-M. On yearly premises i.e. compared to Jul’15, NMDC’s iron ore production is down by 23%. It appears that in Aug’16, production may fall further.
3. NMDC’s iron ore sales up by 10% in Apr-Jul’16 – In first four months of this fiscal (i.e. Apr-Jul’16) NMDC iron ore sales summed up to 10.2 MnT against 9.3 MnT in the same period last year. Out of NMDC’s iron ore sales figure of 10.2 MnT in FY17 (till Jul’16), 6.4 MnT (up by 25% Y-o-Y) has been sold from its Chhattisgarh mines and remaining 3.8 MnT (down by 10% Y-o-Y) sold from Karnataka.
4. Rising prices in global market – Monthly average index of Fe 62% fines moved up by USD 6/Mt M-o-M in Jul’16 to USD 57/MT, CFR China. Continuing its uptrend, iron ore price index is presently seen at USD 61/MT, CFR China. Following this sharp price hike, low-grade iron ore export from Odisha has picked up.
5. Seasonal uptrend in sponge iron prices – Sponge iron prices in central India have gained some strength over seasonal factor and increasing coal prices. Presently offers are seen at INR 12,400/MT (ex-works for 80 FeM).
Southern India lump importer participates in NMDC’s e-auction –
Tamil Nadu based iron ore importer – Akshara Industries has recently participated in NMDC’s Kumaraswamy e-auction and procured 4,000 MT lump (Fe 61%) at bid price of INR 1,794/MT (basic). Another importer – Jeevaka Industries is also seen sourcing iron ore from Karnataka e-auctions.
It is to be noted that NMDC Karnataka e-auction prices have remained unchanged since May’16 despite they have witnessed reduction in Chhattisgarh. Base prices of lump (Fe 62.2%) offered by NMDC Donimalai mines stood at INR 1,927/MT and fines (Fe 60.2%) at INR 1,650/MT. Base prices for NMDC Kumaraswamy mines are currently as follows: fines (Fe 59%) stood at INR 1,348/MT and for lump (Fe 63.6%) stood at INR 1,847/MT.
Though seasonal factors and increasing global prices may give some scope to the miner to raise iron ore prices but whether the sponge and pellet makers will be able to absorb the increased cost remains a big question.
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