Iron ore sees price hike

　　Recently, Brazil's mining firm, Vale, called for a 90 percent price increase for iron ore, following similar decisions made by the other two mining giants, Rio Tinto and BHP Billiton. The action severely threatens the ongoing negotiations between the miners and their customers.

　　The China Iron and Steel Association has attacked the attempts by iron suppliers to increase annual prices.

　　Shan Shanghua, Secretary General, China Iron and Steel Association, said, "The massive increase of steel production has caused a tense relationship between supply and demand. The three giants, Vale, Rio Tinto and BHP Billiton, account for 70 percent of the world's sea-borne traded iron ore. They are making supernormal profits by continuing to raise prices."

　　At the beginning of the negotiations, Rio Tinto raised prices by 40 percent. BHP Billiton then in February called for a 50 percent increase, followed recently by the whopping 90 percent hike by Vale. The huge profits of iron ore trade are created by the massive cost increase to steel manufacturers. Many Chinese steel makers are facing great challenges this year.

　　Shan said, "The steel industry is already struggling in an era of meager profits. A further price hike will bring substantial losses to steel makers both in China and other countries. The downstream customers or users will also fall victims."

　　Analysts believe Vale's exaggerated 90-percent call is not the result of rising ocean freight costs as they are currently still relatively cheap. However, when the peak of iron ore purchases comes in April, manufacturers will have to pay more as by then ocean freight will see a rise. Europe's steel association has gone further in its attack on the move, saying it is threatening economic recovery.