In a relief to major domestic steel firms, state-run iron ore miner NMDC has reduced price of lumps by Rs 200 a tonne and Rs 100 per tonne for fines for the current month on tumbling global prices and lower demand.

NMDC, India’s largest iron ore producer, had reduced the price for lumps by Rs 200 per tonne in November. It, however, did not change the price for fines last month.

Following the reduction, the price of lump ore, which has more iron content and is used mostly by domestic steel makers, now stands at Rs 4,200 per tonne. The prices of fines, having less content of iron or the inferior grade, now come down to Rs 3,060 per tonne.

The miner reviews the prices of the key steel-making raw material every month going by the global prices and domestic demand, had not tweaked rates during the July-October period.

Global iron ore prices have nosedived to five-year low at around $70 per tonne mainly because of subdued demand from China, the largest producer of steel in the world.

The holding on of the price by NMDC during the four-month period coupled with inadequate availability within the country have forced JSW Steel, a major customer of NMDC, to import the raw material. Essar Steel also buys large quantity of iron ore from NMDC.

The price cut, which might be followed by other miners, would benefit domestic steel firms which are now in a precarious situation now with rising imports from China, Japan and Korea. The price cut could help them to better their margins.

The demand for iron ore has also come down in line with the fall in steel production. NMDC’s sales in October actually fell from the previous month even as its sales in first seven months of current fiscal rose to 17.65 million tonnes against 16.03 MT during the corresponding period last year.

Domestic crude steel production also declined by 0.5 per cent in October, 2014 from the immediate past month, mainly by a decline of 0.9 per cent in production by major producers and a 0.1 per cent decline in production by non-major producers.

The price cut might impact NMDC’s net sales realisation a little during the current quarter, although it is confident of imporving the bottom-line for the entire fiscal.

NMDC had clocked Rs 6,420 crore net profit in the 2013-14 fiscal. In the first two quarters of the current fiscal, it has reported Rs 3,482 crore. The company also hopes to improve its sales volume to around 32 million tonnes for the current fiscal.

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