KOLKATA: NMDC Ltd, the largest supplier of iron ore, has slashed its prices by 25% across all categories for long-term agreements for the remaining months of the current fiscal.
The decision to reduce prices was taken at a board meeting Thursday, mainly on account of the global recessionary trends.
Most steelmakers, who source iron ore from NMDC, will now breathe easy.
The price cut will, however, not be implemented with retrospective effect, but from December 1,2008.
Sources told DNA Money the decrease would be applicable on the 30-40% increase in prices that was effected from April 1,2008.
The increase in prices was decided a few days back after the final rounds of negotiations with the Japanese Steel Mills.
DNA Money on November 18,2008,had reported that the mining major could internally review prices once again given the opposition from the steel sector, which was struggling in times of downturn and a general recessionary trend.
Sources said the 25% drop in prices across ore categories is expected to bring down prices significantly.
Iron ore fines, which constitute almost 60% of its supply for long term agreements would come down to Rs 1,500 per tonne.
Iron ore lumps, which are of over 65% ferrous grade would be around Rs 2,500 per tonne.
Prices are still a little higher than what is available outside NMDC but this offers some respite to steel companies.
"We could see our offtake going up now that there is a comfort factor," said an official. NMDC had seen a 40% drop in offtake of iron ore following production cuts announced by steel companies in recent weeks. Many of the companies were not buying iron ore because of steep prices.
NMDC sells 2.5 million tonnes of ore a month. The total production of the company is around 30 million tonne annually including exports. The company exports just about 10% of its production.
NMDC was forced to increase prices on the basis of benchmark JSM (Japanese Steel Mills) prices, which was decided on the Australian prices, which saw an increase of 96.5% on iron ore lumps and 79% on iron ore fines.
NMDC sells 90% of its product through long-term contracts to domestic steel makers, sponge iron plants, pellet plants and pig iron plants.
