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UPDATE 1-India's NMDC cuts Oct iron ore prices by 2-11 pct

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MUMBAI, Oct 9 (Reuters) - India's National Mineral Development Corp has cut iron ore prices by 2-11 percent for October from September, catering to steelmakers who face domestic shortages of the key ingredient and have had to turn to expensive imports.

India's steel imports have soared in recent months as domestic output growth slowed because of lack of raw materials, while demand continues to outpace supply.

"There was a demand from domestic steel manufacturers to reduce prices, so this was done to support them," a source at the country's biggest iron ore miner said on condition of anonymity.

Steelmakers including JSW Steel and Essar Steel face challenges in obtaining iron ore, an important steel making ingredient, because domestic production has been reduced by mining bans in key iron ore producing states like Karnataka and Goa. That has forced them to turn to expensive imports.

"It is a good move and will directly benefit local steel makers like JSW Steel and Kalyani Steel ... it will lower their costs," said Basant Poddar, vice president of the Federation of Indian Minerals Industries.

State-run NMDC, which accounts for about 15 percent of iron ore mined in India, has over 40 percent of the market.

Private miner Sesa Goa also saw iron ore sales fall, by 86 percent to 0.2 million tonnes in the second quarter, due to a ban on mining operations and transportation in western Goa state.

(Reporting by Siddesh Mayenkar; Editing by Jo Winterbottom and Ken Wills)

((siddesh.mayenkar@thomsonreuters.com)(+91-22-61807163)(Reuters

Messaging: siddesh.mayenkar.thomsonreuters.com@reuters.net))

Keywords: INDIA NMDC/