Is steel industry forcing NMDC to cut prices against market trends?

The bearish outlook projected for coal and iron ore at the start of this calendar year is turning out to be overstated.

At start of this calendar year, almost all commodity experts gave a bearish outlook for iron ore and coal. Global warming and pollution related issues were responsible for coal to be written off as the fuel of future. The reluctance of financial institutes to lend loans to coal fired power plants was taken as the last word on future of coal.

Similarly, the supply glut attributed to excess supply from top iron ore mining companies along with steel production cuts in China, was attributed to the bearish outlook for iron ore.

Ironically, both commodities have performed extremely well giving returns to their investors. In the international market, iron ore prices have recovered from their lowest levels of USD 39 at the start of this year to USD 77 in November.

India is expected to be grossly surplus in iron ore production in this financial year. The steel lobby is putting pressure on public sector enterprise, National Mineral Development Corporation (NMDC) to cut prices.

However, the demand for iron ore getting sold through e-auction is increasing. In the e-auction held on Nov. 25, 2016, lump prices increased by Rs 500 per tonne from the floor price due to aggressive bidding. It is to be seen if NMDC follows the international price trend by increasing the price of iron ore or falls prey to the steel lobby by reducing the price of iron ore.

An upward revision in prices by NMDC will help the government with enhanced collection of levies including royalty. Shivakumar G. Malagi