Feb 23, 2005

Steel Moonshot

The FT($$) explains the recent jump in steel stocks.
Rio Tinto on Wednesday became the second big mining group to lock in a 71.5 per cent price increase for iron ore in negotiations with Nippon Steel, Japan's biggest steelmaker.

The move followed an announcement on Tuesday by Brazil's Companhia Vale do Rio Doce, the world's largest iron ore miner, that it had agreed the same price increase with Nippon Steel as well as JFE Holdings and Kobe Steel, also of Japan, for the year beginning this April.

News of the agreements have driven shares in mining companies such as Rio Tinto and BHP Billiton up to record levels. Steel stocks have fallen, however, reflecting worries that the industry will have to absorb the higher costs rather than pass them on to customers in steel price rises.

But steelmakers outside Japan have stressed that the deals struck by Nippon Steel should not be seen as a guide for other iron ore negotiations, as Japan is a relatively small iron ore consumer.

1 comment:

  1. Alzahr at Capital Chronicle has a more detailed look at the steel industry.