Mumbai: NMDC Ltd, the country’s largest iron ore producer, said December sales fell for the third straight month as the global recession cut demand for the steel making material.
Sales declined 35% last month after slumping 65% in November and 40% in October, chairman Rana Som said on Wednesday in a phone interview, without disclosing absolute numbers. The October and November decline exceeds the 30% drop estimate given by the steel ministry last month.
A global financial crisis is curbing demand for steel from auto makers and builders, forcing steel companies worldwide to cut production and delay purchases of iron ore and other raw materials. NMDC’s third quarter profit will fall from the Rs9,700 crore reported a year earlier, said Niraj Shah, an analyst at Centrum Broking Pvt. Ltd in Mumbai.
“This was probably the company’s worst quarter in the last few years,” said Shah, who doesn’t rate the shares of NMDC, owned 98.4% by the government. The company is scheduled to report earnings later this month.
NMDC was forced to cut prices for domestic buyers by 25% from 1 December, partly reversing a 40% increase announced in October. NMDC sells 90% of its 31 million tonnes (mt) annual production in India. “November was the worst month,” Som said from Hyderabad, where the company is based. “Sales saw some improvement in December after the price cut.”
Iron ore stockpiles have increased in China, the biggest buyer, because of lower consumption. The nation has 220mt of ore reserves, including 90mt held at ports, 30mt with steel makers and 100mt held by traders, industry minister Li Yizhong said on 12 December, citing data from the China Iron and Steel Association. Clearing the backlog will take until the end of March, he had said. China buys most of its iron ore for immediate delivery from Indian producers.
NMDC will increase production to 130,000 tonnes a day from 100,000 tonnes as demand improves, Som said.