Iron Ore Prices Drop as Steel Market Suffers

June 15, 2009— The steel market has seen dramatic price reductions in the past few months. In this faltering economy, iron ore prices are alarmingly low compared to last year. Slashed steel prices have caused the top three steel producing companies, Vale of Brazil, BHP Billiton of Australia and Brazil, and Rio Tinto of Australia, to make some serious changes.

Announced last week, Rio Tinto and BHP Billiton merged to form a single steel producing super-giant. They signed a non-binding contract on June 9 to solidify their production joint venture. Splitting their assets fifty-fifty, Rio Tino comments, "The joint venture will encompass all current and future Western and Australian iron ore assets and liabilities."

However, not everyone is a fan of this consolidation. On Tuesday, the China Iron and Steel Association (CISA) stated their opposition on their web page. "The joint venture agreement has a strong monopolistic color and Chinese steel mills will resolutely oppose the agreement." China is hugely impacted by this joint venture, due to the fact that they are Australia's leading buyer of iron ore. Since 2000, China has been responsible for 70 percent of steel growth rates and consume half of the global iron ore output.

Iron ore prices initially began dropping earlier this year. In May, Rio Tinto reported cutting sales by one-third by request of Japanese steel mills. Chinese mills were asking for a 50 percent cut, which was eventually negotiated to 37 percent.

Australia, where a majority of our iron ore is produced, reported a 91 million dollar deficit in April. This was the first deficit recorded in nine months. Despite this, Australia's economy still grew 0.4 percent, much higher than the predicted 0.1 percent.

While iron ore prices have not changed dramatically, thermal coal sales hit a high of $192/ton in July of last year, and have now plummeted to $68.1/ton.

So how will all this affect you, the consumer? With the construction and automotive industries already in distress, GM and Chrysler workers may expect a few more layoffs in the near future. Prices of construction may rise, and jobs may be lost. Refrigerators, toasters, and other such appliances may begin to fluctuate in price.

Now, more than ever, finding the right steel supplier is crucial. Capital Steel and Wire, located in East Lansing, MI, promises honest dealings and an "old-fashion," friendly approach. Capital Steel supplies steel bars, wire rod and steel rods. With a wide knowledge of the global steel industry, they can help you to understand what is happening in the world of metal, so that you may make the best decision for you.

To learn more, you can reach Capital Steel by web at http://www.capitalsteel.net.