Last week, India’s public sector iron-ore miner NMDC Ltd said it is cutting prices by 13% for lumps and 10.9% for fines from 1 March.
Prices were cut in February as well. The falling prices are in line with a steep fall in global iron-ore prices.
Last week also brought more worrying news from China, the protagonist in any development concerning steel and iron ore.
China is targeting a gross domestic product (GDP) growth of 7% in 2015, down from its previous year’s target of 7.5%.
A continued deceleration in its economy spells bad news for steel demand and, in turn, for iron-ore demand.
The country’s focus on cleaning up its environment also means that steel plants may be asked to cut output.
These concerns were enough to send iron-ore prices tumbling last week.
Iron-ore with 62% iron content fell by 3.6% on Thursday to $59.73 a tonne, according to a Bloomberg report, reaching its lowest level since May 2009.
A year ago, they were trading at $114 a tonne. That steep a decline is putting iron-ore industry margins under stress, but the big mining companies are not cutting output. Their costs still allow them to make profits, even if at lower rates.
But this steady decline in iron-ore prices continues to put pressure on steel makers. At one level, demand for the alloy is weak. Mercifully, production growth is also down, again chiefly due to China cutting output. In 2014, global crude steel production rose by 1.2%, while China’s output was up by 0.9%, according to the World Steel Association.
Normally, slowing steel production could have supported prices. But falling iron-ore prices put pressure on steel prices as well, while a rising tide of exports from China and Russia are adding to the problem. India is facing this problem as well, with finished steel imports up by 58% in April-December, and this, when local production was up by only 1.6%.
Naturally, domestic prices are under pressure and weighed on the industry’s December quarter results. That does not seem about to change in the March quarter either, given the current trend in global iron ore prices.
The only relief will be that firms without captive mines should get iron-ore at cheaper rates, while a successful completion of coal block auctions should see steel companies who have won these blocks benefit from assured availability.
But NMDC’s performance is likely to be hit by weak realizations.
Source; Live Mint
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