Well, here it is, the end of easy street for iron miners producers Rio Tinto PLC (RTP) and BHP Billiton (BHP) of Australia, and Brazil’s Vale S.A. (VALEThe Globe & Mail this morning reportsthat talks with China over prices have “gone into overtime.” China’s steel mills, which consume half the world’s iron ore, looked unlikely to complete negotiations with RTP and the rest by today’s deadline for annual ore price agreements, “pushing China … onto the volatile spot market.” Globe cites Chinese steel industry sources.
China buying ore on the open market, outside of agreed contracts, would create “a huge derivatives market” in iron ore, which could erode the power of BHP and RTP and Vale to collect what they need to make a profit.
In effect, BHP and RTP, which are merging, and Vale, are having a tougher time pushing China than are computer makers, who this morning scored a victory in China’s agreement to postpone an order mandating Web filtering software on all new PCs in China.
I penned a negative piece on just this possibility a few weeks ago, when it was announced that BHP and RTP would merge, after RTP rejected an offer from China’s Chinalco steel mill.
BHP shares today are up 55 cents, or 1%, at $55.95, RTP shares are down 11 cents, or .1%, at $168.84, and Vale shares are up 8 cents, or .5%, at $17.91.
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