Iron ore

Iron ore refers to the minerals and rocks from which iron can be extracted. Iron ore is considered as one of the most important raw materials for the steel industry along with coking coal. It is to be mentioned that equal amount of coking coal and iron ore is needed to produce steel.

Iron Ore: A brief Market Overview

The rise of China as an industrial giant has made this metal even more vital for both the Chinese and global economy as the country continues to emphasise on the steel production and more and more focusing on the import of iron ore, making it a potential market for the global miners. The massive demand of iron ore and coking coal led towards a significant price hike for these minerals in the international market in a seven year period (2002-2008) with iron ore recording 420 percent and coking coal 520 percent hike in price.

How the Price is Determined?

The three biggest iron ore producers sit with the steelmakers separately throughout the globe on an annual basis for negotiating the annual contract price where the Chinese and Japanese steelmakers plays the leading role on the other side of the table. Usually these meetings take place between December and March which depends on the overall commercial scenario and the agreements with independent stakeholders regarding the price. However, the price negotiation has seen some significant changes lately with the iron market starting to adopt a system of “quarterly semi-negotiated price” for iron. However, this issue has raised debates among the miners and steelmakers.

The Key Players of the Industry

Australia, Brazil, India and China are the top four iron ore producers of the world. The production of iron ore grew steadily for seven years straight until 2009 when all the countries recorded a drop in production. Only Australia and South Africa came up with some expectations which apparently was not good enough to improve the overall market scenario.

The Chinese demand for the metal allowed some of the Australian miners (along with other international mining companies) to boom in the industry with BHP Billition (BHP) and Rio Tinto (RIO) leading from the front. These two companies along with Brazil based Vale are considered as three largest players in this industry. The annual business of the Australia based miners allowed them to become some of the most attractive enlisted companies of the stock exchange with investors seeking more access to their stocks time to time depending on the market developments. However, volatility does exist in this market like most others.