Shares of this mid-cap company, focused on iron ore exploration and production, jumped 5 percent on Wednesday morning following a rise in lump ore and fines prices, reaching their highest level in five months.
Price Movement
In Wednesday’s trading session, share price of NMDC Ltd reached an intraday high of Rs.225.29 per share, up 4.5 percent from the previous close of Rs.215.41 per share. The stock has retreated since then and is currently trading at Rs.222.50 apiece.
What happened
Shares of NMDC Ltd (National Mineral Development Corporation), the state-run company, are in the spotlight on Wednesday following its announcement of a price increase for lump ore and fines. This marks the second price hike by NMDC in October.
According to its exchange filing, NMDC has raised the price of lump ore by Rs.600 to Rs.6,350 per tonne, while fines have increased by Rs.400 to Rs.5,410 per tonne. These prices represent the highest levels for NMDC’s lump ore and fines since May.
Interestingly, this price hike comes at a time when global iron ore prices are declining. Iron ore prices have dropped by 11 percent to SG$101, down from a recent high of SG$114 reached on October 8.
Earlier this month, NMDC had raised lump ore prices to Rs.5,750 per tonne and fines to Rs.5,010 per tonne.
Impact on Steel Manufacturers
This increase is expected to elevate production costs for steel manufacturers, which could result in higher steel prices and margin compression for companies that cannot adjust their selling prices.
Indian steel producers may experience diminished competitiveness in the global market as they grapple with increasing raw material costs, especially when compared to international competitors who benefit from lower prices.
Furthermore, NMDC’s price adjustments might encourage other domestic mining companies to raise their prices as well, leading to increased market volatility.
Capacity Enhancement Plans
NMDC Ltd. currently has an iron ore production capacity of around 50 million tonnes (MT), with major contributions from its mines in Chhattisgarh and Karnataka, specifically 18 MT each from Kirandul and Bacheli, and 14 MT from Donimalai.
The company aims to increase this capacity to 100 MT by 2030 through significant investments and expansion efforts, including a planned investment of Rs.50,000 crore
Financial Overview
In its latest financial update, the company reported remarkable net sales of Rs.5,414 crore for Q1 FY25, reflecting a slight 0.4 percent increase from Rs.5,395 crore in Q1 FY24. Profit after tax increased 20 percent to Rs.1,969 crore in Q1 FY25, compared to Rs.1,653 crore in Q1 FY24.
About the company
NMDC Ltd. is a leading Indian government-owned mining company, primarily focused on iron ore production. Founded in 1958 and headquartered in Hyderabad, it operates major mines like Bailadila and Donimalai.
As a Navratna Public Sector Enterprise, NMDC plays a crucial role in India’s mineral production landscape and contributes significantly to the country’s steel manufacturing sector through its subsidiaries focused on steel production.
Written by – Siddesh S Raskar
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