NMDC shares slumped over 4.5 per cent on Monday following the state-run miner's decision to slash iron ore prices aggressively in the wake of falling global prices. NMDC last week cut prices of iron ore fines by 20 per cent and lumps by 6.1 per cent to Rs 1,960 per tonne and Rs 3,050 per tonne in a surprise mid-month review.
Analysts say NMDC will have to reduce prices further because of the plunge in global iron ore prices. Spot iron ore has lost 60 per cent over the past 12 months, dropping below $50 a tonne in April for the first time since a key index pricing began in 2008, amid a glut as mega miners Vale, Rio Tinto and BHP Billiton expanded production.
Iron ore will fall to $36 a tonne in the third quarter and stay below $40 for the rest of the year as big miners boost supply even further and China's demand declines, Citigroup said last week.
Cutting prices will help NMDC stay competitive vis-a-vis imports. In the previous 2014-15 fiscal year, the domestic steel industry imported around 15 million tonnes of iron ore.
Iron ore is the most important component for the steel industry.
As of 09.40 a.m., NMDC traded 4.2 per cent lower at Rs 127.90. The stock was the top Nifty lower and underperformed the broader markets, which traded with 0.3 per cent losses.
(With inputs from Reuters)
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