Iron ore producer NMDC cuts lump prices by Rs 300 per tonne and Rs 500 per tonne in fines, which contain less iron. Following the reduction in the rates, the price of lump ore now stands at Rs 3,250 a tonne and fines Rs 2,460 a tonne for the current month. Speaking to CNBC-TV18, CMD Narendra Kothari said lumps are priced 25-30 percent higher than fines prices.
According to him, the international prices are starting to show signs of softening. The state-owned company is expecting a lot of price cuts in Odisha market.
Below is verbatim transcript of the interview:
Q: Some sectors like metals are in deep pain on a day like this, your stock is down 0.4 percent. How do you compare with landed prices now, after this cut, are you at a discount or on par with landed prices?
A: We are almost at par with the landed price as far as east coast is concerned, we have major iron ore consumptions there and definitely there is some difference between the west coast where there are some customers like JSW, Ispat and Welspun. Therefore, in most of the area, we are quite competitive with imported price.
Q: Are you not competitive with the west coast?
A: There are still some gaps at the West coast.
Q: Are you higher?
A: We are little higher than imported price.
Q: Should we expect more price cuts?
A: No, at the moment, I don’t think so because we are seeing the overall price and slowly the import is coming down in this month. I expect there will be more supplies for our side and with the price correction, we are quite competitive, we are increasing our sales in this area.
Q: Due to these price cuts, by how much could the margins dip because currently you are sitting at around 64-66 percent levels, could we see a big dip in margins going ahead?
A: I am not expecting that because we will compensate it with more cess and more turnover during this month, this is a month of March and definitely we have good demand and good supplies I am expecting, We will able to maintain the level of margins which we are having.Q: What was the key reason for this price cut?
A: Our pricing strategy is based on market demand and supply and domestic prices are going on. Orissa is a major supply, it was supplying to various steel plants in country and Chhattisgarh and Karnataka from where we are doing it. Recently, there is a lot of price cut in Orissa and there were more supplies than demand and steel demand also, the price of steel internationally is going down, domestic price is also going down so this is one of the main reasons to correct our prices to the market level which is a domestic market level price.
Q: Your lumps are more expensive than fines, so is there more discount? Are you at a much pricier-to-landed price in the case of the lumps?
A: No, I think I should make clear that always lumps are almost 25-30 percent higher than fine prices because lumps are in more demand for particular process. So lumps internationally everywhere are high, the fine price and lump price cannot be compared.
We have reduced our lump prices more effectively and now our lump prices are very competitive in a market. We have more demand and more supplies there and the entire sponge iron industry takes the lumps and some steel plants also take the lumps from us.
Q: What about dispatches, that is also looking very bad, the April-February numbers we have is exactly what it was a year ago level, no growth at all?
A: Just till December the growth was there and if you see the month of October-November, due to the cyclone, we have lost a lot of production. Almost million tonne due to this cyclone and this problem of the bridge and railway line dispatches and so, our main issue was dispatch and now overall if you see this is oversupply in the world, the iron steel demand is coming down.
Q: Can you give us a production target, year-to-date you have seen about 28 million tonne, going ahead what would your production target be?
A: I will cross last year’s figure of 30 million tonne.
Q: Your January sales were 11 percent lower year-on-year (Y-o-Y) and February sales also look lower.
A: January and February there was some problem but March we are coming up and overall we are ahead, so we will cross this 30 million tonne mark in March.
Q: What is your inventory?
A: My inventory has come down, they are around 4-5 million, they are not very high or low, it is a normal average inventory, which we are maintaining throughout the year.
Q: The Essar slurry pipeline, are all the disruptions behind you or have there been any disruptions of late?
A: There is some disruption in between and all due to the various price and mechanism - Essar has not lifted the material they are suppose to lift, in between there was some problem with Essar slurry pipeline but at the moment they are lifting the materials.
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