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NMDC Ltd, India’s largest iron ore producer, announced strong production and sales performance for September. It also announced yet another downward price revision for its produce for October.

The iron ore price cuts have weighed on investor sentiment for the past few months. The firm announced a cut in prices of lump ore and iron ore fines for October to 5,950 a tonne and 4,760 per tonne, respectively. These are 20-25% lower than July.

Favourable trend
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Favourable trend

NMDC’s price cuts are in tandem with a sharp fall in global iron ore prices. Globally, iron ore prices have dropped to about $120 a tonne from as high as $220 a tonne in May. Given that China has cut its steel production to achieve decarbonization targets, iron ore prices have plummetted, being a key raw material for steel production. Analysts said global iron prices have started stabilizing. “We like NMDC, expecting iron ore price correction is over now," analysts at PhillipCapital said in a note. Furthermore, strong demand for steel in the domestic market should help NMDC’s volume growth. For September, its production surged 47% from a year ago. Its sales were up 29.4% year-on-year (y-o-y).

In the first six months, NDMC’s production and sales rose 46.6% and 35.5% y-o-y, respectively. The firm is working on increasing output sharply. Its annual report highlights plans to reach 67 mtpa (million tonnes per annum) capacity by 2025 (production of 34.15 mtpa in FY21) through the expansion of its screening plant, slurry pipeline, pellet plant and doubling of the 150-kilometre Kothavalasa-Kirandul (KK) rail line.

NMDC is expected to report strong performance in Q2. A 110% y-o-y jump in iron ore realizations and a volume growth of 35.3% y-o-y will lead to 94% y-o-y increase in NMDC’s Ebitda, as per analysts at Centrum Stock Broking Ltd.

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