Iron ore takes the precedence to raise price over steel products do. Also, the level of price rise of iron ore is higher than that of steel products in China’s steel market.
Thus, a weird phenomenon has become more and more obvious: iron ore price has forced China’s steel products to raise price and at the same time takes away large part of the profits therefore earned.
Facing the new phenomenon which may probably continue in 2011, experts have given the reason: China produces large amounts of crude steel which needs iron ore as its raw material. However, the supply of iron ore depends much on imports from foreign mining giants. Setting monopoly price for China’s steel enterprises is quite easy for them and it’s also how those iron ore undertakings take away steel enterprises` profits.
Therefore, it’s stated that the monopoly in resources supply has become the major hindrance of development of China’s steel industry
The price rise of iron ore will not only seriously compress the margin of profits of China’s steel industry, but also harm their compatibility as well.
China’s steel industry may step into the situation of “low development and small profit margin” as the pressure from rising iron ore price accumulates gradually.