ASIA Soaring ore prices may be the silver bullet Beijing needs
Apr 01, 2008 | 01:43 PM
Something strange happened when news broke in Asia of a benchmark iron ore price increase of 65 percent. Shares in regional steelmakers went up as investors, apparently cheering the biggest rise in iron ore costs since 2005, rushed to buy.
The share price increases weren't modest. Stocks in Nippon Steel Corp., Japan's largest steelmaker with whom Brazil's Vale concluded the benchmark deal, rose by 3.2 percent, and the holding company of JFE Steel Corp., Japan's second-biggest steelmaker, enjoyed a 6.3-percent boost, while Baosteel Group Corp. Ltd., China's top producer, also saw its shares rise by a good chunk.
Given all the hoo-hah during the negotiation period about steel mills trying to resist a catastrophic rise in iron ore prices, why did the market appear to welcome a 65-percent increase?
The explanation most widely given was that the increase was actually a lot lower than anticipated. But looking back at media reports, there were few public predictions above 70 percent. Maybe it was the relief factor—that the uncertainty had been lifted and mills could gear up and plan properly for the increase.....
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