What I don't get is that there have been massive price increases for iron ore especially over the past 2 years. China has been in between a rock and a hard place in negotiations due to the lack of competition between the majors, they have had no choice but to accept.
We have also witnessed huge interest in iron manufactures in purchasing stakes in Australian iron ore companies for no other reason than to gain a price advantage on the raw material for steel making.
Now because growth is slowing globally at least in the ST resulting in the price contraction everyone is running around screaming that the sky is falling. I have read that the Chinese played a similar tactic for nickel production, they stockpiled the material forcing suppliers to heavily discount and I believe that a similar scenario is at play here. The global credit situation has greatly helped in there tactic.
The majors RIO and BHP announcing that they intend to reduce supply to market is a very smart one, playing a backhand to the Chinese iron makers. This will result in price stability and allow them to chew through any stockpiles.
With the amount of money gushing out of pretty much every government whether it be freshly printing or hoarded surpluses to stimulate the economy and activity. The end result will be return to inflation and commodity boom. What people don't realise is that this is all just like the Y2K phenomenon, a lot of panic over nothing, the world has not ended, the world is still consuming. We have hit a speed hump from a credit and debt crunch, this is temporary. Is the need for steel temporary?
This is all a rant open to ridicule or discussion :)
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