balanced io price rise fall article

Hi,

We know that Vale is seeking an unprecedented mid-year 20% price increase. This article from the Financial Times, has arguments for and against a rise:

http://www.ft.com/cms/s/0/7e5152dc-7b3d-11dd-b839-000077b07658.html

Key points:

For:
Vale’s negotiating stance, analysts said, could be an attempt to set the tone for next year’s iron ore price negotiations, due to start late next month or early November, when miners are expected to demand a 30 per cent increase.

Against:
Judy Zhu, an analyst with Standard Chartered in Shanghai, said China’s steel production growth slowed to single digits in July, compared to a 14 per cent rise in the same period of 2007.

“This has built a large surplus of iron ore in the domestic market,” she said. “Spot iron ore prices should trend lower further to reflect the improving supply and demand balance.”

For:
But Sinosteel Trading Corporation said Chinese mills’ leverage was limited. “The suppliers have absolute bargaining power, which is largely a result of China’s voracious demand for iron ore and other raw materials … I’d say players in China will have to accept [the increase],” a company spokesman said.



Joel