NMDC - Iron Ore seen in big demand

NMDC has recently raised iron ore prices, after about 45 days. Lump Ore prices were raised to Rs. 5,350 per MT, w.e.f. 21-3-21, which was ruling at Rs. 5,100 on 7th Feb. Similarly Fines prices raised to Rs. 4,310 per MT, from Rs. 4,210 per MT in this period. No doubt, this will be seen positive for all Iron Ore producers, which also indicates that good demand is seen from user industries, who are reportedly operating at over 100% capacity utilisation.

Due to this rise, steel makers, producing Flat and Long products, have raised product prices, and maybe will raise it fruther, which will not only be pass through, but raisng their margins as well. It is exactly like restaurants raising Idli rates, on Rice prices seen rising, which eventually raise there margins, as Idli prices are raised in multiple of 1 rupee, but effective cost increase may be seen 10 to 20 paise per Idli.

This further segragates steel makers, having their own captive iron ore mines, in which SAIL is seen the biggest beneficiary, where virtually entire iron ore requirement is met through captive sources, while JSW Steel is seen the biggest loser, having amongst largest capacity of steel making in India, is sourcing entire iron ore need from outside, as company does not have its own captive mines.

So, expensive raw material may not be seen always negative, while it would be fundamentally incorrect to apply this as mechanical negative call on all steel makers.
 
This is neither a buy nor a sell recommendation, while stock reommendations are provided exclusively to our paid members in the Member Zone.