Chart Beat: Why NMDC does not have enough steam to sustain the momentum

 The state-owned iron ore producer hiked prices of lumps and fines for the fourth consecutive time in January.
The state-owned iron ore producer hiked prices of lumps and fines for the fourth consecutive time in January.

Summary

  • Global iron ore prices have started falling, and back home, domestic steel prices are on a weak footing

NMDC Ltd’s shares have risen almost 60% in the last one year fuelled by factors such as the uptick in iron ore prices and healthy volume growth. The state-owned iron ore producer hiked prices of lumps and fines for the fourth consecutive time in January. The prices of lump ore and fines stand at 5,600 per tonne and 4,910 per tonne, respectively.

But prices may lose their momentum going ahead. For one, global iron ore prices have started falling. Currently, the price of China iron ore fines is about $129 per tonne, down 7% versus December end levels, according to SteelMint.

Back home, domestic steel prices are on a weak footing. Iron ore is a key raw material used in steel production, and subdued demand for it means a further ramp-up in iron ore prices can be ruled out. “We see downside to spot iron ore prices as the recent rally, mainly on optimism around Chinese stimulus, lacks fundamental grounds," said analysts at Kotak Institutional Equities in a report on 18 January.

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