NEW DELHI India’s key iron ore producer NMDC is testing a new pricing formula for its output to shield its profits from the volatilities reflected in global benchmarks, a source with direct knowledge of the matter told Reuters.
State-run NMDC, which sells its output locally, currently releases monthly iron ore prices linked to inventories, international prices and domestic market dynamics.
The company plans to launch the new formula after initial trials, the source said, declining to be identified as the plan is not public yet.
“We are taking baby steps,” the source added. The new formula will not link prices to any international index or exchange, the source said. With the launch of the new mechanism, NMDC will gradually move to a more frequent disclosure of iron ore prices, the source said, adding the intervals had not been finalised yet.
“Going forward, we will try to do it more frequently so that there is no lag in whatever is happening in the market and our prices,” the source said.
The miner will also collect pricing information from different stockyards across cities, compared to the existing mechanism of gathering information from mines, the source said.
NMDC did not respond to a Reuters email seeking comments. India’s JSW Steel, the country’s biggest steelmaker by capacity, primarily sources its iron ore from NMDC.
NMDC reported a fall in fourth-quarter profit, hurt by lower product prices. India is also in the process of overhauling the average sale price of iron ore to garner higher revenues for the government, as the mines ministry believes some miners try to depress prices artificially in order to pay lower royalties to the government.
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