Resource News

NMDC Forecasts Record Profit on Increasing Iron-Ore Prices

March 10 (Bloomberg) — NMDC Ltd., Asia’s third-largest iron-ore producer by value, forecast a record profit for the next fiscal year as demand from construction and automobile companies boosts prices of the key steelmaking raw material.

Prices of iron-ore lumps and fines may increase as much as 30 percent in the year starting next month helping Hyderabad, India- based NMDC’s profit exceed net income posted in the year ended March 31, Finance Director S. Thiagarajan said, without giving numbers. Profit rose to 43.72 billion rupees ($962 million) in the last fiscal year, the company’s highest ever.

Rising demand from automakers, including Maruti Suzuki India Ltd., builders and power projects helped boost steel consumption in the world’s second-fastest growing major economy by 8.5 percent in the 10 months ended Jan. 31. India’s government plans to invest 1.74 trillion rupees by March next year to upgrade the nation’s roads, ports and other infrastructure, the finance minister said last month.

Long-term contract prices for iron-ore fines and lumps are expected to rise 25 percent to 30 percent in the year starting April 1, Thiagarajan said yesterday in a phone interview. NMDC’s production for the next fiscal year is expected to increase as much as 20 percent to about 30 million tons, he said.

NMDC, the world’s third-largest mining company by value in the 36-member Bloomberg Asia-Pacific Mining Index, has more than doubled in the past 12 months. The shares fell as much as 4.4 percent to 361 rupees and traded at 375.80 rupees as of 12:37 p.m. today in Mumbai. The Bombay Stock Exchange’s benchmark Sensitive Index rose 0.5 percent.

Annual Prices

The company, in which the government started selling shares today, contracted annual iron-ore fines for domestic buyers at 1,936 rupees ($43) a ton and lumps at 3,000 rupees a ton for the year ending March 31. NMDC supplies 85 percent of its output to local consumers. It sells the rest on contract to buyers in Japan and South Korea and through the spot market to consumers in China.

Net income in the nine months to Dec. 31 fell 28 percent to 23.82 billion rupees from a year earlier as revenue and output declined because of damage to a pipeline used to transport ore in May.

China’s demand for steel is driving iron ore consumption, Siddharth Rungta, president of the trade body Federation of Indian Mineral Industries, said last month. Iron ore prices may soar 60 percent this year as the global economy recovers and steel consumption gains, Morgan Stanley said. Order books are full at Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, because of demand from automakers, China International Capital Corp. said today.

China’s iron ore imports in January and February climbed 21 percent to 96.1 million metric tons as the nation’s $586 billion stimulus spending boosted steel demand.

India’s government, which owns 98.38 percent shares in NMDC aims to sell an 8.38 percent stake through a public offer that will end on March 12. The shares are being offered at between 300 rupees to 350 rupees apiece…read more at the Bloomberg