Govt Enforces ‘Melt and Pour’ Rule for All Steel in Public Projects Nippon Steel expected to finalize U.S. Steel acquisition at $55 per share NMDC Limited reports a 38% drop in Q4 FY24 consolidated net profit RINL to Raise $23 Million Through Land Sales Amid Crisis
NMDC, the largest producer of iron ore in the country, has a one-year target price of ₹319 apiece, and domestic brokerage firm Incred Equities kept its 'add' rating on the stock because it believes that the company is in a sweet place given the growing demand for pellet exports from China.
Over the past year, the company's shares have increased dramatically, rising from ₹104 per share to the current ₹273, marking a multibagger gain of 162%.
The brokerage identified several variables influencing the pellet and steel markets. It said that the high levels of pollution in areas that produce steel and the scarcity of scrap had increased the cost of scrap relative to pellets.
Pellet prices exhibit seasonality, as Chinese steel mills buy fewer pellets during the summer due to dust emissions during the sintering process but are forced to shift to pellets in the winter.
Currently, the pellet premium over iron ore is at a minimum level but is expected to revert to the mean value of US$0.50/t/% Fe content. The brokerage projects that a 67% DRI grade pellet will trade near $150/t over the long run.
China's focus on scrap usage in electric arc furnaces led to a rapid increase in scrap usage. However, local scrap availability has stagnated, resulting in a fall in scrap usage in CY23.
The decline in scrap exports from the Western world has not helped the situation for China. To curb pollution and remain cost-effective, China must import high-grade pellets, as global scrap prices are at a 10-year high compared to pellets, it noted.
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