NMDC Shares Jump 5.5% as Iron Ore Prices Soar Amid China’s Economic Recovery

Shares of NMDC, India’s largest iron ore producer, rose nearly 5.5% today, reaching ₹247.50 per share. This increase comes after a significant rise in iron ore prices, driven by optimism about China’s economic recovery. Recently, Chinese authorities announced plans to allow homebuyers to refinance their mortgages to help stimulate economic growth.

To combat economic challenges, China is introducing several stimulus measures aimed at reviving its economy, which has been struggling. A major focus is on improving the struggling real estate sector, which has faced declines for several years, negatively impacting overall economic activity and investor confidence. Key cities like Shanghai, Guangzhou, and Shenzhen have started easing regulations to support the property market.

Additionally, a decline in iron ore inventories at Chinese ports contributed to the price surge, with inventories dropping to 146.6 million tons last week. Iron ore shipments from major suppliers, including Australia and Brazil, also fell by 4% during the week ending in September.

As a result, iron ore prices jumped by 8.4% to $110.65 per ton in early trading today, following an 11% rise the previous week. Base metal prices also saw gains, with copper rising by 1% to $10,083.50 per ton and zinc increasing by 0.7%.

The recent rally in base metal prices was further supported by the People’s Bank of China reducing banks’ reserve requirements, which is expected to free up around 1 trillion yuan for lending. The central bank also cut key interest rates to encourage borrowing and improve market liquidity.

Iron Ore Production Increases by 7.4%

Domestic iron ore production saw a significant rise, reaching 116 million metric tons (MMT) from April to August in FY 2023-24, compared to 108 MMT during the same period last year, marking a growth of 7.4%, according to the Ministry of Mines. Iron ore is a crucial part of India’s mineral production, accounting for about 70% of the total mineral output by value.

NMDC is recognized as one of the world’s low-cost iron ore producers and also operates India’s only mechanized diamond mine in Panna, Madhya Pradesh. The company has announced a capital expenditure plan of ₹22 billion for FY25 to build a slurry pipeline and new processing plants, aiming to boost its production capacity to 100 MMT by 2030.

A recent report from LKP Securities highlighted that NMDC is well-positioned to benefit from the rising demand for steel in India, expecting a resurgence in capital expenditure similar to the boom seen between 2003 and 2007. The report also emphasized NMDC’s access to high-quality iron ore reserves, which are expected to last for the next forty years, strengthening its market position.