The whole world watches China when it comes to the natural resource play. Iron ore and steel companies have watched their share prices swing wildly based on news coming out of the Middle Kingdom in terms of what Chinese mills will be buying and how much they are willing to pay (particularly for the annual iron ore negotiations). Of late, the steel and iron sector has bounced nicely based on rising Chinese demand. Now noises coming out of China's government imply the steel bounce might have been inflated demand numbers. (via FT Alphaville).
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FeedChina's steel story: government slowing down demand
Continue reading China's steel story: government slowing down demand
Tug of war between miners and steelmakers
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?
Rio Tinto (RTP) says it will charge spot price for some contracted iron ore
In a move that many customers may view as controversial, miner Rio Tinto announced Thursday that it intends to charge steelmakers market prices [subscription required] for some critical raw materials, despite the existence of long-term contracts, The Wall Street Journal reported.Rio Tinto (NYSE: RTP), via a clause in existing contracts, plans to charge spot-market prices for 10% of the iron ore in its customers' contract. Market prices are currently attracting bids in the $180-190 per metric ton range, more than double the $75-$85 per metric ton cost for Rio's fixed contract customers, The Journal reported.
Robust economic growth in emerging markets in Asia (particularly in China and India) and Latin America, combined with solid economic growth in Europe and the Middle East has propelled major price increases in minerals, commodities, raw materials and metals during the past three years.
Continue reading Rio Tinto (RTP) says it will charge spot price for some contracted iron ore
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