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NMDC's Iron Ore Volumes May Dip 9% in FY21 - Reports

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Fines/Lumps
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11 May 2020, 20:46 IST
NMDC's Iron Ore Volumes May Dip 9% in FY21 - Reports

Iron ore volumes of NMDC Ltd, the country's largest producer, may tumble by nine percent in this fiscal as COVID induced nationwide lockdown has squeezed demand from end-user industries.

NMDC's iron ore production is seen at 28.5 MnT in FY21. The output from the company's Chhattisgarh mines is set to decline 10 percent to 22 MnT whereas production in Karnataka is seen to be down by 7 percent year-on-year to 6.5 MnT.

"During April 2020, NMDC's volumes declined 49 percent to 1.38 MnT due to subdued iron ore demand. Most large steel plants operated below their rated capacity while secondary steel producers had largely shut operations. NMDC is expected to record a Y-o-Y fall of 35 percent in iron ore production during Q1 or April-June quarter of this fiscal", said an analyst.

Muted iron ore demand-led NMDC to go for back to back price cuts. In April, it cut prices by Rs 500 per tonne, meaning a reduction of 17 percent. For this month too, NMDC slashed prices of both fines and lumps by INR 400/MT. Pursuant to the price correction, NMDC's iron ore fines are now priced at INR 1960/MT while lumps are priced at INR 2250/MT.

A report by brokerage firm Motilal Oswal forecasts that soft iron ore prices will lead to NMDC's Ebitda (earnings before interest, taxes, depreciation and amortization) by 40 percent in FY21 to INR 3940 crore.

"NMDC's aggressive price cut indicates weakness in iron ore demand. However, we expect NMDC to increase prices once demand normalizes. A favourable decision on Donimalai mine would increase NMDC's volumes by approximately 20 percent. The company has spent INR 1650 crore on the greenfield Nagarnar steel plant with guided commissioning in FY21. We, however, remain sceptical on the commissioning of this plant, and thus, have not factored it into our earnings", the report noted.

11 May 2020, 20:46 IST

 

 

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