Iron prices through the roof
We've said it before. The iron mining industry, dominated by three big players (and perhaps soon to be two) has the less concentrated steel industry by the short hairs. The tope three iron companies (BHP Billiton, Rio Tinto, and CVRD) produce over 70% of all the iron ore in the world. And with demand higher than ever in China and India, steel companies are scrambling to assure a steady supply.
Three steelmakers (Japan's Nippon steel, South Korea's Posco, and Germany's ThyssenKrupp) signed a deal with CVRD to buy steel at prices 65% higher than last year. The excuse is that transport and mining costs are up, but that might account for a 10% raise in prices. The reality is that the Big Three can name their own price, the demand is there and the leaders, whether or not they secretly collude, they understand each other well enough not to compete on price.
For a shaky world economy, it's another hit. Steelmakers say they will have to raise their prices by 20% or more. And, as my friend Michael Donnelly points out in his blog, "From the macro standpoint such a bold price hike on such a basic commodity will send shock waves throughout the supply chain. I can't think of anything except water and oil, that have the broad stroke importance of iron."
The "free" market at work.
10:27:05 PM 
|
|
