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NMDC Product price hike – Impact on stock

Established in 1958, NMDC (National Mineral Development Corporation) stands tall as a Navaratna Public Sector Enterprise (PSE), specialising in iron ore mining. Governed by the Ministry of Steel, Government of India, NMDC holds a prominent position with seven operational iron ore mining leases, strategically spread across Chhattisgarh and Karnataka.

Recent Price Adjustments

The shares of NMDC have experienced an upward trajectory, witnessing a nearly 3% surge. This surge aligns with recent price hikes in Lump Ore and Fines, effective from January 2, 2024:

  1. Lump Ore (65.5%, 6-40mm) @ Rs. 5,600/- per ton
  2. Fines (64%, 10mm) @ Rs. 4,910/- per ton.

Comparatively, the previous prices, adjusted from November 23, 2023, were:

  1. Lump Ore (65.5%, 6-40mm) @ Rs. 5,400/- per ton
  2. Fines (64%, 10mm) @ Rs. 4,660/- per ton.

This price adjustment reflects market dynamics, impacting NMDC’s revenue and market positioning.

Production & Sales Overview (December 2023): The production and sales figures for iron ore, up to December 2023, highlight the following:

State

Monthly

Cumulative

Production (in MT) Sales (in MT) Production (in MT) Sales (in MT)
Dec-23 Dec-22 Dec-23 Dec-22 Upto Dec 23 Upto Dec 22 Upto Dec 23 Upto Dec 22
Chhattisgarh 3.21 2.57 3.11 2.24 21.46 18.97 22.15 18.16
Karnataka 1.27 1.04 1.08 1.08 10.33 7.96 9.82 7.64
Total 4.48 3.61 4.19 3.32 31.79 26.93 31.97 25.8
  • Both production and sales have witnessed significant growth year-on-year across both states and overall.
  • Karnataka boasts a considerably higher rate of growth compared to Chhattisgarh, particularly in terms of production.
  • The December 2023 figures further reinforce the upward trend observed in both production and sales over the past year.

These figures underscore NMDC’s consistent contribution to iron ore supply in the market.

Insights from CRISIL Report

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on NMDC’s bank facilities. The ratings consider NMDC’s strong business risk profile as the country’s largest iron ore producer, coupled with high profitability and robust financial risk and liquidity profiles. NMDC’s strategic importance to the government, reflected in its Navratna status and majority holding by the Government of India, adds to its creditworthiness.

Find: Publicly Listed Credit Rating Agencies in India

The report acknowledges NMDC’s seven iron ore mining leases, with a total reserve of 1,697 MT, providing significant revenue visibility with a mining life of over three decades. Environmental clearances and the long-term validity of licenses enhance NMDC’s operational stability.

NMDC’s financial strength is evident through healthy cash accrual, low bank limit utilization, and a robust net cash balance of Rs 11,279 crore as of June 30, 2023. The company’s low-cost production and high ore quality offer resilience against offtake risks. However, its exposure to the cyclical steel industry poses challenges during downturns, impacting volume and operating cash flow.

Conclusion

NMDC’s journey, marked by strategic operations and recent price adjustments, underscores its resilience in the dynamic iron ore market. The CRISIL report further reaffirms the company’s financial strength and strategic importance. As NMDC navigates market fluctuations, its commitment to sustainable mining practices and adaptability to industry dynamics position it as a key player in India’s iron ore sector.

Also read: NMDC’s Golden Leap

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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