World of Shortages anyone?
- Japanese and South Korean steel mills from Brazilian miner Vale, the industry's first term deal this year, but agreed to a 65 percent jump in iron ore pricesAustralian miners may hold out for more.
- Shares including Japan's Nippon Steel and China's Baosteel rallied on relief that the increase wasn't greater. The term price of iron ore, the main raw material used to make steel, has risen fivefold since 2001.
- Term ore prices had been widely expected to rise by at least 50 percent after spot prices soared to record highs in 2007 and Chinese demand showed no signs of abating.
- BHP Billiton (BHP) and Rio Tinto (RTP) would likely hold out for higher prices that would better reflect the lower cost of shipping iron ore from Australia and sizzling spot prices, industry sources and analysts said.
- The 65-percent hike with Vale only related to iron ore and did not include shipping costs. BHP and Rio might seek to set a price including freight, analysts said.
- The rise could squeeze margins for the steel industry, which is already facing high costs for coking coal and shipping, plus increased competition from Chinese plants.
5 comments:
If this is going to squeeze the margins for the steel industry, then why are the stocks behaving so well? Will they be able to just pass the rising cost to their customers?
Thats a great question and why I have been not so interested in jumping on the steel bandwagon. It appears people believe China will pay any price for any product. Even food producers like Nestle are rallying because they are saying they can pass along all costs to consumers. Poor consumers.
Isn't part of the thinking with steel is that the US economy will make a quick recovery?
well unless we have an urgent need to build more skyscrapers and cars, I would not get behind that theme if it is. I think its simply a play on global boom in Asia and Middle East. If the US would be booming I'd think timber would be ramping and its comatose.
Look at the smaller company,s that export more in the way of production than Brazil or Australia Ferrexpo opened mine for Russia & China from 1st June lost over 45% in 30 day's and has traded sideway's from 1st Jully (FXPO.L)Price closed 176 1st June Price closed 119 8th Jully. Never mind the big fish watch this baby GROW over next 30 day's then get out and let them fight it out don't worry about USA it will come back also look at the dollar it's China's doing!
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