NMDC Cuts Prices for Iron Ore…Steelmakers Benefit

In a surprise and totally unexpected move, India’s biggest iron ore producer, state-run NMDC, has cut the price for its most common grade of iron ore by a very significant six percent.

The price reduction, which is effective immediately, was announced earlier this week.

The lower price for iron ore is likely to benefit steelmakers in India and abroad, as well, particularly in China, Japan and Australia.

India, represented by NMDC and other producers, used to be the world’s third largest exporter of iron ore, but regulators in that country recently clamped down on illegal mining practices which severely cut production and dropped the country from its third place standing as a producer and exporter of iron ore.

The reduced production also forced the country’s major steelmakers, JSW Steel and Essar Steel to increase the amount of iron ore they imported, a practice which raised their costs.

That said, NMDC cut its prices this month (January) for its sixty-five percent coal, a common grade that is certain to put smiles on the faces of steelmakers throughout Asia, including, of course, Australia and the rest of the world.

The price cut was actually equivalent to a drop of 5.8%. The new, lower cost for a ton of this highly-coveted iron ore is now just $99.00.

Industry analysts have speculated publicly that NMDC lowered prices of its most common and most popular iron ore in response to demands from local steelmakers who complained that the company’s prices were too high.

If right, it is that pressure that triggered the action which resulted in a lower-cost-per-ton for NMDC’s sixty-five percent iron ore.

India’s steelmakers actually imported nine million tons of iron ore between April and November of 2012. The projected total for imports for the fiscal year that ends in March, 2013 is fifteen million tons. Of course, that number may now be too high because of the lowered cost per ton for iron ore produced domestically by NMDC.

Prices in the international market remain high. One ton of sixty-two percent grade iron ore still sells for $144.90, a figure that is well above the price for a ton of iron ore now being charged by NMDC.

NMDC produces fifteen percent of India’s total iron ore output. It is also a major seller to countries in the Pacific Rim including, as mentioned earlier, China, Japan and Australia.

The lower cost for the iron ore is certain to lead to increased construction – and greatly improved economies – in the countries that count themselves as customers of NMDC, including Australia.

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