The rates of iron ore from the state-owned NMDC Ltd have increased by 2-5% as of Tuesday. Given that the current March quarter is typically strong, the most recent price increase is very much in accordance with expectations.
Additionally, the price of iron ore globally is rising, which benefits local prices. According to experts at Nomura Financial Advisory & Securities (India), global (Australian) iron ore prices have increased by almost 4% month-over-month so far in March compared to February’s average.
Additionally, since the government eliminated or decreased the export duty on iron ore in mid-November, NMDC has raised iron ore prices four times. The price of lump ore and fines from NMDC is currently $4,500 more than $4,110 per tonne, up 18% and 57%, respectively, from values seen in mid-November.
Since NMDC’s sales volumes in January and February were significantly higher than the average volumes seen in Q3, the March quarter’s (Q4FY23) performance is anticipated to be sequentially improved. This would result in improved sales realization, which was a problem in the previous quarter, along with the price increase. This measure decreased by about 35% yoy and 2% sequentially in Q3.
Although the price increase is positive, the company’s stock has barely moved since the most recent price increase statement. It can be inferred from this that investors are watching for a significant rise in volume. In the eleven months that concluded in February, NMDC’s iron ore sales volume decreased by 8.6% to 33.4 million tonnes.
The primary raw substance used to make steel is iron ore, and demand for this metal has not yet grown significantly.
The primary reason for NMDC’s iron ore import parity at higher than historical discounts, according to analysts at Kotak Institutional Equities, is weaker volume offtake, they noted in a report on March 21. 2% will be lost in earnings, but increased prices will make up the difference.
In light of this, NMDC share prices have fallen 9% so far in 2023. It is still unclear whether the business will be able to reach its 50 million tonnes production volume goal for FY24. Significant price increases will have an effect on investor sentiment in addition to volume growth, but analysts do not believe there is much room for significant upside given the weak demand environment. However, if profits perform better than anticipated in the near future, the outlook might improve.
Additionally, if steel consumption significantly increases as a result of China’s economy opening up, it will boost sentiment. It can be observed.
