Iron ore prices to go up by 90%
Over 80% of the Iron ore production across the globe is controlled by just three companies, whereas the top 10 iron and steel producers of the world control only 50% of the global iron and steel production.
That is precisely the reason why the Iron ore producers always dictate terms.
Till the year 2009, the Iron ore producers used to agree on annual contract pricing system with the global iron ore consuming companies. But given the huge demand spurt for the mineral from the Chinese companies , which is far in excess of the supplies, has now prompted the Iron ore producers to shift gears to their advantage.
Yes, the iron ore producers are all set to scrap the annual contract system and go for quarterly pricing of the valuable raw material henceforth. And already two of the producers have gone ahead with a 90% price increase for the second quarter of 2010 I.e, April 2010 to June 2010.
The 90% hike could well become the benchmark pricing for the rest of the consumers as they are left with no choice. And if there is the expected recovery in the US economy in the coming months, the pricing could only go up further in the third quarter of 2010, say experts.
There are at least 10% of the market experts who feel that the 90% hike is indeed very steep, and that alone could pull down the demand for iron ore in the second half of 2010. Let us see who is right.