NMDC Ltd., said December sales fell for the third straight month as the global recession cut demand for the steelmaking material.
NMDC Ltd., said December sales fell for the third straight month as the global recession cut demand for the steelmaking material. Sales declined 35 percent last month after slumping 65 percent in November and 40 percent in October, Chairman Rana Som said today in a telephone interview, without disclosing absolute numbers. The October and November decline exceeds the 30 percent drop estimate given by the steel ministry last month.
A global financial crisis is curbing demand for steel from automakers and builders, forcing steel companies worldwide to cut production and delay purchases of iron ore and other raw materials. NMDC"s third-quarter profit will fall from the 9.7 billion rupees ($199 million) reported a year earlier, said Niraj Shah, an analyst at Centrum Broking Pvt. in Mumbai.
?This was probably the company"s worst quarter in the last few years,? said Shah, who doesn"t rate the shares of NMDC, owned 98.4 percent by the government. The company is scheduled to report earnings later this month.
NMDC shares today had their steepest decline in more than five years. The shares fell 15 percent, the most since July 14, 2003, to 156.20 rupees at close of trade in Mumbai. The Bombay Stock Exchange"s benchmark Sensitive Index declined 7 percent.
Fitch Ratings said on Jan. 2 steel demand will not recover before the second half and iron-ore prices will fall by as much as 40 percent in the year starting April 1.
NMDC was forced to cut prices for domestic buyers by 25 percent from Dec. 1, partly reversing a 40 percent increase announced in October. NMDC sells 90 percent of its 31 million metric ton annual production in India.
?November was the worst month,? Som said from Hyderabad, where the company is based. ?Sales saw some improvement in December after the price cut.?
Iron ore stockpiles have increased in China, the biggest buyer, because of lower consumption. The nation has 220 million tons of ore reserves, including 90 million tons held at ports, 30 million tons with steelmakers and 100 million tons held by traders, Industry Minister Li Yizhong said Dec. 12, citing data from the China Iron and Steel Association. Clearing the backlog will take until the end of March, he had said.
China buys most of its iron ore for immediate delivery from Indian producers. Cash prices of iron ore imported by China fell 58 percent in 2008. Customers in China may ask BHP Billiton Ltd., Rio Tinto Group and other global suppliers to accept an 82 percent price cut after steel prices fell to 1994 levels, the China Iron and Steel Association said last month.
NMDC will increase production to 130,000 tons a day from 100,000 tons as demand improves, Som said. The company is also seeking to purchase mines in India, he said.
?We are concentrating on the domestic market,? he said.