Analysts feel price cut by NMDC may not benefit steel firms

Analysts feel that the recent cut in iron ore price by NMDC may not benefit steelmakers in a big way because the former reduced the price of only iron ore lump.

The prices for the majority of product mix (iron ore fines contributing to 75 per cent of total output) remains unchanged at Rs 2,610 a tonne. Therefore, the reduction in iron ore lump prices by NMDC may not benefit steel firms in a big way, analysts feel.

Earlier this month, NMDC reduced the prices of iron ore lumps to Rs 5,060 a tonne against Rs 5,380 a tonne in the previous month, which is a fall of almost 6 per cent.

Steel prices are dependent on the market demand-supply gap to a large extent and the 6 per cent price reduction announced for iron ore lumps by NMDC for January, is unlikely to create significant impact in the finished steel prices, analysts feel.

NMDC lowered the lump prices following intense pressure from the local steel producers to reduce ore prices in order to ensure parity with the imported iron ore prices.

Meanwhile, Venkatesan Subramanian, global leader, Metals and Minerals Practice, Frost and Sullivan expects the domestic steel companies to pass on their increased cost over the last quarter to end customers in a phased manner.

He expects domestic steel firms to raise prices because of increase in international prices in the wake of upward movement in iron ore prices and promising demand.