InvestorQ : Why have the shares of NMDC rallied so sharply on Friday, 11 December?
Angel dcosta made post

Why have the shares of NMDC rallied so sharply on Friday, 11 December?

Juvina Maggie answered.
2 years ago

NMDC climbed by nearly 5% to Rs 114 on Friday after there were reports that benchmark iron ore prices had crossed the $150/tonne level. This marks the highest iron ore prices since 2013. Globally, if you consider the Singapore benchmark, then iron ore futures are up 70% on the back of China demand and a higher stimulus expected.

The rally received a bonus boost after Vale SA decided to cut to annual production guidance last week and it has blamed factors like the elevated risks of weather disruptions for all producers in the southern hemisphere region. NMDC has been one of the staunch outperformers in the market, beating the Nifty by a margin.

Since NMDC is the largest merchant miner in India, the global rally in iron ore prices augurs well for the company. It offers the company room to also hike its domestic iron ore prices as cheap imports will no longer be a risk. As a result, brokers have upgraded the volume guidance for NMDC in the coming year on resumption of Donimalai mine by year end.

In fact, apart from the higher demand and surge in iron ore prices, the resumption of the Donimalai mine by itself is expected to drive nearly 11% EBITDA growth in fiscal year 2022. Brokers and analysts are expecting volume growth in the vicinity of 18-20% for NMDC.