According to Brazilian media sources, the big three iron ore mining giants BHP Billiton, Rio Tinto and Vale plan to increase prices for iron ore, coking coal and other raw materials for the third quarter this year. The iron ore price increase will be in the range of 30-35 percent, while the coking coal price increase will be in the range of 10-15 percent.
In line with the Brazilian media reports, Brazilian miner Vale will increase the iron ore price by 35 percent starting in July. In Q2 this year, the iron ore price has already increased by 90-100 percent, while the coking coal increased by 55 percent. Currently, spot prices of iron ore and coking coal are at the highest levels of the past two years.
Meanwhile, insiders in China comment that the consequence of the iron ore price increase is to either push up finished steel prices or eat up steelmakers'' profit margins. More importantly, the strong increase in raw material prices reinforces global inflation. In the price chain, iron ore and coking coal price are likely to be transferred to finished steel and finally to other commodities.
On May 29, Luo Bingsheng, deputy chairman of the China Iron and Steel Association (CISA) said that, although the 77 large and medium size Chinese steelmakers who are members of the association made an aggregate profit of RMB 3.39 billion in the first four months of this year, up 927 percent year on year, serious problems lie hidden beneath the surface. Squeezed by falling finished steel prices and rising costs, Chinese steelmakers'' profits will be severely hit, and some of them will start to incur losses again, Mr. Luo said