Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

India’s National Mineral Development Corporation (NMDC) raised iron ore prices by Rs300/mt ($5.44/mt) in line with higher global prices and a domestic supply crunch. The price increase is also supported by robust sales in August. NMDC’s iron ore production rose by 15pc to 1.62mn mt in August from the prior year and sales rose by 20pc to 1.79mn mt.



NMDC hiked iron ore fines priced to Rs2,960/mt ($40.32/mt) and lumps to Rs3,250/mt ($44.27/mt) effective September 5, according to a company release. Prices exclude royalty, permit fee and other taxes. Since July, the company has raised iron ore prices by Rs1,000/mt ($13.62/mt).


In the domestic market, there is a shortage of iron ore due to halt in mining activities amid rains and change of management of mine ownerships. Mining is yet to start at some Odisha-based iron ore blocks that were allotted to new merchants in March. Ore production is expected to dropped in the FY2020-21 due to delay in the operations on account of COVID-19 crisis while international ore prices continue to remain high supported by healthy demand in China. 


Iron ore traded at around $125/mt cfr China, up from $80/mt in early-April. Moreover, domestic mills have increased iron ore procurement since July as they ramped up production to 80-90pc capacity. Recently, Tata Steel India said that it is operating at close to 100pc capacity. Jindal Steel is also operating at around 85-90pc capacity utilisation.


Impact on sponge iron

Sponge iron manufacturers based in Central India have also increased prices following the price hike by NMDC, said a mill owner in Raipur. Sponge iron prices have increased by around Rs3,000/mt ($40.87/mt) in Raipur since early August. Pellet sponge traded at around Rs20,100/mt (273.84/mt) ex-works Raipur on Monday. Domestic sponge prices are also supported by higher scrap prices. Shredded scrap prices in India rose to around $325-330/mt cfr Nhava Sheva, which is an 8-months high.



NMDC has proposed to increase its ore production capacity to 67mn mt per year in FY2021-22, as per its latest annual report. In FY2019-20, NMDC produced 31.49mn mt iron ore. Production dropped by 0.1mn mt due to the Covid-19 pandemic. The company is also focusing on value addition by setting up a 1.2mn mt pellet plants utilizing slimes in Karnataka. 



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