Tug of war between miners and steelmakers

Posted Jan 14th 2009 4:03PM by Connie Madon
Filed under: International Markets, Forecasts, Industry, Competitive Strategy, China, Japan, BHP Billiton Ltd ADR (BHP), Rio Tinto plc ADS (RIO), Commodities

In almost every raw materials industry there is a tug of war between miners of the raw materials and manufacturers who refine their materials.

Today's struggle is between Chinese and Japanese steelmakers and iron ore miners. Steelmakers want a 40% cut in iron ore prices, while miners are holding out for a cut of 20% or less. China's leading steelmaker said that iron ore prices will fall by at least 40-50% in 2009.

China is threatening to cancel contracts with the three main iron ore companies, VALE (NYSE: RIO), Rio Tinto (NYSE: RTP) and BH Billiton (NYSE: BHP) if their demands for price cuts are not met.

Iron ore prices reached a high of $200 a ton in 2008 and then fell to $55 a ton. Prices have since rallied back to $72 a ton.

Do you think these price cuts will help our infrastructure projects?

Tags: iron ore, IronOre, price cuts, PriceCuts, steelmakers