Indian iron ore prices unlikely to drop any further - NMDC Chairman

• State-run miner has cut prices by 30-35% in past five months
  
  
• Production target in FY'23 is 47-48 mnt
  
  
• Company is exploring new deposits in Chhattisgarh
  
  

"NMDC has reduced iron ore prices by 30-35% over the last five months. Prices have almost hit the bottom and are likely to stabilise from here on," Sumit Deb, Chairman of NMDC, told SteelMint on the sidelines of the 5th Iron ore & Pellet Summit and India Coal Outlook Conference organised by SteelMint Events on 3-4 August, 2022 in New Delhi.

Hinting that NMDC is unlikely to revise prices downwards, Deb stated: "As far as the export duties are concerned, the government needs to take a call. We believe that there is sufficient supply of iron ore in the country and we expect that the government rolls back the duty on iron ore below Fe58% because the domestic industry usually consumes ore above Fe58%."

"As a government entity, NMDC's mandate is to produce and ensure there is sufficient supply of iron ore in the country. There is no question of cutting production due to the rapid decline in domestic iron ore prices. Steel prices have also come down rather quickly over the past two months. I believe we are likely to see stability in prices in the coming days," said the industry veteran.

Recovery in demand: "For the first time after the imposition of export duty on steel and raw materials we are witnessing a recovery in demand," he contended. "Of course, seasonal factors such as the monsoon affect demand and we usually witness iron ore production coming down due to seasonal variations. But, going forward, we should see an improvement in iron ore prices as the demand for steel is also recovering."

The imposition of duty on steel had an overall dampening effect but with raw material prices coming down, the steel industry is in a much more comfortable position. Profitability and margins have improved, he stated.

Production target: NMDC's production target for FY'23 is 47-48 million tonnes (mnt). India's production in the last fiscal was around 253 mnt. "The country's iron ore output should go up by another 10% or so in this fiscal," stated Deb.

Duty impact: In Odisha, India's leading iron ore producing state, the impact of the duty imposition has been direct and lethal in terms of raw material purchase sentiments. "The Odisha Mining Corporation (OMC) has faced problems with offtake. However, that happened over the past two months and the demand situation has largely stabilised," Deb stated.

New deposits: NMDC is facing a hurdle related to the maximum mining area regulation which is inconducive to raising production. NMDC is striving to raise production to 100 mnt by 2030 and has entered into joint ventures to enhance production. "We are exploring new deposits such as Deposit 13 and Deposit 1 in Bailadila, Chhattisgarh, which have substantial overall capacity of around 35-40 mnt. Moreover, we will start operations at Deposit 4 soon," the Chairman said.

Doubts around NMI: Responding to queries on the proposed National Mineral Index (NMI), Deb said: "The NMI is supposed to be a benchmark index and we don't know as yet the inputs that will go on to shape it eventually. Therefore, it's still unclear what shape it will finally take." Notably, there is a widespread apprehension that merchant miners will lose control over mineral pricing after the NMI comes into effect.

There is also the apprehension that if NMI comes into effect retrospectively it will give an unfair advantage to companies that won mines at auctions held since 2020. However, there is a lot of "speculation around NMI", said Deb, and while the state governments are looking at maximising revenues, it is still early days to make definitive statements about NMI.

Sustainability concerns: "NMDC is trying to shore up its sustainability credentials. "We have got Ernest & Young on board this year as a consultant to develop our ESG policies," Deb informed.