NMDC stock needs an uptick in iron ore prices and volumes

“Essentially, this component is valued at approximately “1,400 crore from CY19, which KMERC will have to refund to NMDC within the next two months,” said analysts at Nuwama Research. 1,400 crore, a 30% increase in FY24 earnings per share.

This decision not only compensates the earlier contribution but also enables NMDC to pay at par with Category ‘A’ miners. This will help NMDC in getting iron ore in Karnataka.

Separately, NMDC Steel Ltd was listed on the exchanges on February 20. NMDC had last year demerged its steel business. This removes the overhang related to capital expenditure on the steel plant, which was a drag on the return ratio. In addition, it will enable NMDC to focus on expansion of its core iron ore business.

While these developments are sentimentally positive for NMDC, key catalysts for the stock include increase in the company’s iron ore volumes and prices, which were sore points in the December quarter. Low iron ore prices meant that realizations declined year on year.

There are better levers in the March quarter. NMDC has raised prices three times since the removal of export duty on iron ore in November.

Up to date, the latest prices for lump ore and fines 4,400 per tonne and 3,910 per tonne respectively. In addition, the current quarter is seasonally strong, so there is a favorable headwind for volumes.

Further, the 10-year contract to be executed between NMDC and NMDC Steel for supply of iron ore at arms length price has the potential to secure a long-term customer, and hence, to boost volumes of the former. said Satyadeep Jain, an analyst. At Ambit Capital.

However, volatility in international ore prices is the key.

China’s economy is slowly reopening as the country is an important market for metals. In view of this, it remains to be seen whether NMDC hikes the prices further.

Any such event would be a trigger for NMDC stock, which is down about 9% so far in calendar year 2023.