In early morning trading, shares of NMDC, India’s largest iron ore manufacturer, jumped nearly 5.5%, pushing the price up to Rs247.50 a share.
This spike is a result of a steep rise in the price of iron ore, fueled by an increasing optimism about China’s economic recovery.
The Chinese government is implementing various measures to stimulate its slowing economy. It has a particular focus on revitalizing the real estate sector.
China’s stimulus program and its impact on Iron Ore Demand
China has experienced a long-term economic slowdown in the construction and real estate industries.
Beijing, as part of its recovery effort, is easing the regulations in key cities such as Shanghai, Guangzhou and Shenzhen, to stabilize the real estate market.
This change has directly affected the demand for raw material like iron ore which is essential for construction projects.
Iron ore stocks in Chinese ports also dropped last week to 146.6 millions tons. The shipments from Australia and Brazil, two major producers, also decreased by 4% on a weekly basis.
Iron ore prices rose by 8.4% in the early morning trade, to $110.65 per tonne. The price of iron ore has increased by 8.4% in the last week.
The London Metal Exchange (LME) saw an increase in the price of base metals. Copper rose 1%, to $10,083.50 a ton, and zinc increased by 0.7%.
China’s central banking policies are a boost
China’s central Bank, the People’s Bank of China, has been implementing policies that inject liquidity into the Chinese economy, in addition to supporting the real-estate sector.
The PBoC reduced banks’ reserve ratios for the second time in a year by 50 basis points, releasing approximately 1 trillion yuan to the market.
The central bank has also reduced key interest rates in order to encourage lending and economic activity.
These actions have improved investor confidence and helped the metals markets, which has seen significant gains in price over recent days.
NMDC gains from the global demand growth
NMDC is a major player in the iron-ore industry and benefits from the global demand increase.
India’s iron ore production grew by 7.4% between April and August of FY25.
The production reached 116 MMT compared with 108MMT during the same period of last year.
Iron ore is a major part of India’s minerals production. It accounts for about 70% of its total output.
NMDC has expanded its operations in order to meet the growing demand.
The company recently announced that it would be investing Rs 22 billion in capital expenditures for FY25.
This investment will be used to fund the construction of a slurry pipe and new processing facilities, as part of NMDC’s strategy to increase production to 100 MMT per year by 2030.
NMDC has a strong position in the market
NMDC has a major advantage, as it has access to iron ore reserves of high quality that should last at least 40 years.
LKP Securities, an Indian brokerage firm, has stated that NMDC will benefit from the rising steel demand as well as renewed capital expenditures. This is similar to what happened between 2003 and 2007.
NMDC’s upward trajectory is expected to continue as China’s economy begins to recover, and the global demand for iron-ore rises.
The strategic investments and long-term reserves of the company will likely further cement its position as a major player on the global iron ore markets.
As new information becomes available, this post NMDC shares rise 5.5% on China’s economic rebound hopes may be updated.
