The deal between Rio Tinto plc (NYSE: RTP) and Japan’s Nippon Steel that cut the Japanese company’s iron ore price by a third does not appear to be acceptable to China’s steelmakers. Confirming our prediction, Bloomberg has reported that the chairman of China’s largest steelmaker has said, “The 33 percent cut is too far from our demand of 40 percent to 45 percent.” While not a part of the notion, this could potentially have ramifications for Cliffs Natural Resources (NYSE: CLF).
China has amassed huge stockpiles of iron ore and believes that it can procure what it needs on the spot market if the miners refuse to meet their price demands. Cliffs Natural Resources (NYSE:CLF) supplies iron ore pellets to China and could get a nasty surprise if the Chinese hold fast to their demands for lower prices.
RTP shares are trading down slightly in early action, while Cliffs shares are up more than 3%, to $25.35.
Paul Ausick
May 27, 2009
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