The decline in steel production has forced global mining companies Brazil's Vale and the UK-listed Rio Tinto and BHP Billiton to offer discounts on their supply and contract, and the commodity iron ore and coking coal for steelmaking will be the first price cut in a year in the next quarter.
Because of the relationship between steel prices and the cost of everyday goods, the cost of iron ore and coking coal is not only critical to the global economy, but also to the profitability of the world's two largest heavy industry sectors, mining and steel manufacturing.
Mining company executives and analysts estimate that iron ore prices will fall 10% to 15% in the fourth quarter, and coking coal prices will fall 5% to 10%. Falling prices will drive down steel prices or increase the profitability of steel producers.
BHP Billiton, the world's largest mining company, warned last week that global steel oversupply will hit “short-term demand†for commodities related to steel production. Before the price fell this quarter, iron ore prices experienced more than doubled since last year, and this triggered a protest from steel producers. Even after falling prices, iron ore prices will still be nearly 120% higher than last year's level.
The above price decline will cover the last quarter of 2010, which will be the first price cut triggered by the new quarterly pricing system linked to the spot market. In April of this year, when the price soared 95% to 105%, the new pricing system replaced the original benchmark system of annual peace negotiations and price negotiations that lasted for 40 years. In the third quarter of this year, iron ore and coking coal prices rose by 20% to 30% due to strong steel production.
The final price will be announced on the 31st, and the prices of mining companies will vary due to different price formulas.
Because of the relationship between steel prices and the cost of everyday goods, the cost of iron ore and coking coal is not only critical to the global economy, but also to the profitability of the world's two largest heavy industry sectors, mining and steel manufacturing.
Mining company executives and analysts estimate that iron ore prices will fall 10% to 15% in the fourth quarter, and coking coal prices will fall 5% to 10%. Falling prices will drive down steel prices or increase the profitability of steel producers.
BHP Billiton, the world's largest mining company, warned last week that global steel oversupply will hit “short-term demand†for commodities related to steel production. Before the price fell this quarter, iron ore prices experienced more than doubled since last year, and this triggered a protest from steel producers. Even after falling prices, iron ore prices will still be nearly 120% higher than last year's level.
The above price decline will cover the last quarter of 2010, which will be the first price cut triggered by the new quarterly pricing system linked to the spot market. In April of this year, when the price soared 95% to 105%, the new pricing system replaced the original benchmark system of annual peace negotiations and price negotiations that lasted for 40 years. In the third quarter of this year, iron ore and coking coal prices rose by 20% to 30% due to strong steel production.
The final price will be announced on the 31st, and the prices of mining companies will vary due to different price formulas.
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