Business & Technology Nexus

Dave Stephens on technology and business trends

Iron Ore Stand-off Between China and Producers

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I own stock in a company called CVRD (NYSE:RIO). Besides being a huge Oracle customer, they are an absolutely enormous mining company. Their headquarters are based in Brazil though they are effectively a global company. And they’ve had an amazing run – check out their recent stock performance.

Last year, CVRD and other iron ore producers really “stuck it to the man,” increasing prices by over 70%. Now China has introduced a not-so-secret “secret price cap policy” in an effort to exert some pressure on the producers to keep prices down. But it’s not clear what leverage they have as demand has been outstripping supply for some time.

It’s an interesting story. Higher prices this low down in the food chain spell worry for inflation watchers worldwide. Either higher prices pass through, or corporate profits will get pinched. That is, unless China gets the iron ore producers to blink first.


Written by Dave Stephens

03/7/06 11:11 AM at 11:11 am

Posted in Opinion

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