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The fatal blow to the Chinese auto industry is coming. The rise in iron ore prices is not 65% that was announced at the beginning of the year, but may be 95%!
The latest news from the Financial Times shows that the international giants Rio Tinto and BHP Billiton demand that Chinese iron and steel enterprise customers receive the biggest upward adjustment in iron ore prices from Monday to Monday, otherwise supply from Australia may be interrupted.
Traders and industry officials stated that the annual iron ore contract prices requested by the two mining companies rose by more than a 71.5% record increase in 2005, and they tried to increase prices by 85-95%.
Rio Tinto and BHP Billiton have warned Chinese customers that some of the annual contracts will expire on June 30 and they will stop supplying them on the old terms. They said that they would switch iron ore to higher-priced spot markets.
Analysts pointed out that most of Rio Tinto’s iron ore contracts will expire on June 30. Some of BHP Billiton’s contracts will not expire in September, so there is more time to negotiate and Rio Tinto is the first to negotiate.
Macquarie Bank of Australia stated that Rio Tinto seeks to increase the price by more than the market expectation of 85-95%. The bank stated in a report: "This position shows that investors must be prepared for the long-term negotiations that may lead to unpleasant results."
Rio Tinto and BHP Billiton have requested prices that have risen more than Brazil's Vale, because they are close to China, reducing transportation costs.
Traders said freight costs from Australia to China fell by 37% last week due to the fact that at least one of the mining companies stopped booking some of the ships for transport under the original contract in July. This shows that if the negotiations break down, they intend to ship to the spot market.
In a report, Morgan Stanley pointed out that the iron ore market is facing an “unprecedented†price situation. "The market is still extremely tight and there is a serious shortage."
The Chinese auto industry is facing an unprecedented crisis, and the release of this crisis may have only just begun in the second half of 2008.
If the goals of Rio Tinto and BHP Billiton are reached, the price of Chinese steel will rise and the automobile will still be the product of more than 70% of steel. In March of this year, some domestic automakers had revealed that the pressure of 65% of iron ore going to the terminal of automobile costs would result in a reduction of about 3-5% of the overall profit, and today 95% of the upward pressure will be transmitted to the terminal. Want to know. If calculated as a ratio of 65% to 3-5% of profit loss, the profit loss caused by 95% of the price increase is about 4.4-7.3%, and the profits of automakers are further compressed.
The latest news from the Financial Times shows that the international giants Rio Tinto and BHP Billiton demand that Chinese iron and steel enterprise customers receive the biggest upward adjustment in iron ore prices from Monday to Monday, otherwise supply from Australia may be interrupted.
Traders and industry officials stated that the annual iron ore contract prices requested by the two mining companies rose by more than a 71.5% record increase in 2005, and they tried to increase prices by 85-95%.
Rio Tinto and BHP Billiton have warned Chinese customers that some of the annual contracts will expire on June 30 and they will stop supplying them on the old terms. They said that they would switch iron ore to higher-priced spot markets.
Analysts pointed out that most of Rio Tinto’s iron ore contracts will expire on June 30. Some of BHP Billiton’s contracts will not expire in September, so there is more time to negotiate and Rio Tinto is the first to negotiate.
Macquarie Bank of Australia stated that Rio Tinto seeks to increase the price by more than the market expectation of 85-95%. The bank stated in a report: "This position shows that investors must be prepared for the long-term negotiations that may lead to unpleasant results."
Rio Tinto and BHP Billiton have requested prices that have risen more than Brazil's Vale, because they are close to China, reducing transportation costs.
Traders said freight costs from Australia to China fell by 37% last week due to the fact that at least one of the mining companies stopped booking some of the ships for transport under the original contract in July. This shows that if the negotiations break down, they intend to ship to the spot market.
In a report, Morgan Stanley pointed out that the iron ore market is facing an “unprecedented†price situation. "The market is still extremely tight and there is a serious shortage."
The Chinese auto industry is facing an unprecedented crisis, and the release of this crisis may have only just begun in the second half of 2008.
If the goals of Rio Tinto and BHP Billiton are reached, the price of Chinese steel will rise and the automobile will still be the product of more than 70% of steel. In March of this year, some domestic automakers had revealed that the pressure of 65% of iron ore going to the terminal of automobile costs would result in a reduction of about 3-5% of the overall profit, and today 95% of the upward pressure will be transmitted to the terminal. Want to know. If calculated as a ratio of 65% to 3-5% of profit loss, the profit loss caused by 95% of the price increase is about 4.4-7.3%, and the profits of automakers are further compressed.