India: Will NMDC keep iron ore prices stable for Sept supply?

NMDC, under current circumstances, is expected to keep its prices stable in its monthly revision for September 2022 as per SteelMint's analysis.

The PSU miner had raised iron ore prices by up to INR 240/tonne (t) for August deliveries last month. The company raised prices of lump ore by up to INR 200-240/t and fines by INR 100/t, on 11 August. Notably, this is the first hike seen after four price cuts since April.

SteelMint started a new feature of predictive analysis a few months ago, where correlation between certain "predictors"/parameters/market or price influencers suggest an indication of future price movements of a particular commodity.

SteelMint has studied NMDC's price data for the last five years to identify 21 parameters/ influencers which, it feels, are highly correlated, directly or indirectly, with its iron ore price movements.

The predictive price estimation is based on data metrics and co-relations that impact the company's pricing decision such as domestic and global iron ore prices, prices of metallics as well as domestic semi-finished and finished steel.

In the current study, out of 12 parameters, 7 are reflecting a downtrend at present, four are showing positive and one remains unchanged. It can be assumed that NMDC is most likely to keep iron ore prices stable for September dispatches.

Reasons for potential price freeze

• Odisha iron ore prices down: SteelMint's weekly Odisha iron ore fines index Fe 62% moved down by INR 200/t m-o-m to INR 3,400/t ex-mines while the Fe 63% lumps (Odisha) index remained stable at INR 7,000/t ex-mines, as assessed on 27 August. However, on a w-o-w basis, the indices remained stable for both Fe 62% fines and lumps.
  
  
• Base price cut in OMC auction: At Odisha Mining Corporation's (OMC's) iron ore lump auction yesterday, 542,000 t, or 57% of the total quantity of 955,000 t, received bids. The miner increased the bid price for lumps by up to INR 600/t against the last auction on 18 July, 2022.
  
  
• Weak global interest reduce iron ore prices: The spot price of iron ore in China decreased on 29 August as liquidity dwindled amid limited buying interest. Benchmark Fe 62% fines prices moved down by $4.05/t to $101.75/t CFR China. On a m-o-m basis, prices have come down by $15/t. According to several sources, factors such as the decline in the iron ore paper market and unfavourable foreign exchange rates contributed to a cautious stance in the seaborne market.
  
  
• Seasonal impact: During monsoons, shortage in iron ore impact the supply side. India's iron ore production is down sharply by 16% to 19.14 mnt in June against 22.69 mnt in May.
  
  
• DR CLO lots in NMDC's auction receive good response: NMDC had scheduled an iron ore auction from Chhattisgarh recently for 159,600 t of Fe 64-67%, indicative, from Bacheli mines, and 134,400 t (Fe64-65.50%, indicative) from the Kirandul mines. According to market sources, the entire quantity of 16,800 t of DR-CLO was booked at INR 5,587/t against the base price of INR 4,957/t and one lot of Baila lumps was booked at a base price of INR 4,131/t. All prices are on FoR basis, royalty, DMF & NMET extra.

  Looking at the above factors, there seems to be a possibility of rollover in prices.