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 ($4.01/mt) as steel mills ramp up production amid high global ore prices and a domestic supply crunch. NMDC hiked iron ore fines priced to Rs2,660/mt and lumps to Rs2,950/mt effective August 12, according to a company release. Prices exclude royalty, permit fee and other taxes.


In Q1, high international iron ore prices and strong demand in China led to a surge of pellet exports from India to China pushing up domestic iron ore prices. Iron ore prices are at around $120/mt cfr China, up from $100/mt in mid-July. Moreover, there is also an increase in iron ore procurement from secondary steel mills across Chhattisgarh and Odisha after the easing of COVID-19 restrictions. Leading steelmakers in Central India are operating at around 80-90pc capacity.


Another important reason for the rise in ore prices is the demand-supply mismatch in the domestic market. In March, the Odisha government auctioned 20 iron ore and manganese blocks in the state. Among the new allottees, only ArcelorMittal Nippon Steel India (AMNS India) and JSW steel have commenced mining operations at their mines, both of these companies will consume the ore for their captive steel production. The new miners, mostly merchant miners, are yet start mining leading to a short supply of iron ore. Also, heavy rain in many regions is hampering mining operations in India.


Impact on sponge iron

Sponge iron manufactures based in Central India are mostly likely to increased prices further following the price hike by NMDC, said a steel mill owner in Raipur.


In August, sponge iron prices have increased by around Rs2,000-2,500/mt in Raipur and are expected to remain firm through the month. During monsoon, ore production at mines usually slows, which in turn leads to lower production and availability of sponge iron in the domestic market. Pellet sponge traded at around Rs20,300-20,500/mt ex-works Raipur on Wednesday.



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