Continuing their bearish trend for the fifth consecutive trading session, shares of NMDC, India’s largest iron ore producer, fell another 8% in early morning trade on Tuesday, October 8, to ₹211 apiece. This brings the cumulative loss over the past five days to nearly 15%.
Today's drop in shares came after the iron ore prices slumped from a five-month high as a much-anticipated briefing by China’s top economic planner ended without new pledges to boost government spending. Iron ore futures in Singapore fell as much as 4% after being up by a similar amount earlier in the session.
In September 2024, the company recorded iron ore production of 3.04 million tonnes (MT), reflecting a 1.3% increase from the 3 MT produced in the same month the previous year. Additionally, sales saw a year-on-year growth of 13.8%, totalling 3.54 MT last month.
Recently, the company announced an increase in the prices of lump ore and fines. The price of lump ore has increased by ₹400 per tonne, reaching ₹5,750 per tonne, while fines have also risen by ₹400 per tonne, now priced at ₹5,010 per tonne. These new prices took effect on October 1.
This latest price adjustment follows a prior reduction by NMDC. Earlier, the company had lowered the prices for lump ore by ₹600 per tonne to ₹5,350 and for fines by ₹500 per tonne to ₹4,610.
Domestic brokerage Elara Capital projected a 2% YoY increase and a 3% quarter-on-quarter (QoQ) drop in the company’s sales volume during the second quarter of the current financial year (Q2 FY25).
Following two price hikes in Q1 FY25, the company implemented two price reductions: first, a decrease of ₹500 per tonne for both lumps and fines on June 30, 2024, and second, a reduction of ₹600 per tonne for lumps and ₹500 per tonne for fines on August 7.
As a result, the brokerage forecasts that realisations will improve by approximately 14% YoY while declining around 11% QoQ. Consequently, it estimates EBITDA per tonne to rise by 33% YoY but decrease by about 29% QoQ.
Motilal Oswal forecasts that the metal companies within its coverage will experience a QoQ decline in revenue (-3%), EBITDA (-15%), and adjusted profit after tax (APAT) (-27%) for 2QFY25E. This downturn is attributed to weak metal prices and lower sales volumes during the quarter.
It said that the seasonal impact of the monsoon, combined with cheaper imports from China, has exerted pressure on domestic prices and demand. However, a decrease in input costs is expected to partially mitigate these challenges.
Mining companies are likely to report a sequential decline due to reduced volumes stemming from heavy monsoon rains and lower average selling prices (ASP), it stated.
Motilal Oswal highlighted that iron ore prices have decreased by ₹900-1,000 per tonne compared to the exit prices in June 2024. For 2Q, NMDC's average prices for lumps and fines were ₹5,350 per tonne and ₹4,610 per tonne, respectively.
The slowdown in China's real estate sector, which is the largest consumer of metals, has led to an influx of cheaper Chinese exports into the global market, putting downward pressure on global prices. Looking ahead, the brokerage anticipates that China’s stimulus efforts to revitalise its struggling real estate market will provide support for global metal prices.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
