Pricing pressures likely due to increased iron ore supply: NMDC

Public sector iron ore miner National Mineral Development Corporation (NMDC) Limited sees a likely pressure on iron ore demand and prices in the domestic market due to international as well as local factors despite better prospects expected for steel industry growth.

Addressing the annual general meeting (AGM) on Friday NMDC's newly appointed chairman-cum-managing director N Baijendra Kumar said the expectation of stagnation in Chinese steel production, increase in sea-borne iron ore supplies and competition from scrap as a feedstock are some of the factors that would have a likely impact on the company's business in future.

However, during the current year the company expects to achieve a minimum 20 per cent growth in turnover over Rs 8,830 crore registered in the year ended March 2016, according to Kumar. NMDC is planning to achieve a total volume in sales of over 37 million tonnes this year from 35.6 million tonnes in the previous fiscal.

The higher iron ore prices in 2014-15 was a result of deficit supplies owing to the restricted mining across states like Karnataka, Odisha and Goa while the current pricing scenario was largely influenced by the easing of these restrictions, according to TRK Rao, director(commercial) of NMDC.

The company is facing a major competition from the state of Odisha, which has ramped up production to 90 million tonnes last year from 40 million tonnes in 2014-15 and is planning to further raise the output to 100 million tonnes this year, "We are affected by the domestic increase in supply," Rao said adding that Odisha's iron prices was one of the determinants of NMDC's sale price.

Baijendra Kumar, who assumed office as CMD on September 6, 2017, stated that a holistic price regulation strategy for the industry at large was being worked out by a committee headed by the additional secretary of Union Finance Ministry and he was a part of that committee.

The international prices have come down to around $62 per tonne from a peak of $73 in recent times while the domestic prices currently however around $40.

He maintained that NMDC will continue to pursue its monthly price revision policy until an all-inclusive pricing policy is put in place as envisaged by the Centre. Once the report is submitted, views of all the stakeholders will be taken, before finalising the policy by the Government, according to him.

"Taking into account the demand and supply factors, we need to appreciate that global iron ore industry would be in a surplus scenario in the coming years, putting prices and margins under stress. Fortunately for us, India's steel industry is poised for an impressive growth in the years to come, which would certainly translate into higher consumption of iron ore domestically," the company CMD told the shareholders.

For this, the company plans to chalk out aggressive plans to acquire new leases for expansion by bidding for new mines in open auction as well as the special dispensation route, he said.

Responding to a question on the proposed strategic sale of 3-million tonne integrated steel plant at Nagarnar in Chhattisgarh, he said the valuations and the exact percentage of divestment of equity were yet to be determined.The company is spending Rs 3,000 crore in capital expenditure, which include some of the remaining work on the Nagarnar plant, according to Kumar.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel