China imports 42% of the worlds iron ore into China to build the worlds fastest growing economy, on the upside China becomes a well developed country, on the downside the price of iron ore shoots up through the roof.
According to the Financial Times, Chinese steelmakers have agreed to a 96% rise in prices from the Australian mining company, Rio Tinto.
Global inflation fears deepened yesterday as Chinese steelmakers agreed to a record increase in annual iron ore prices - a move likely to boost the cost of cars, machinery and other products.
Chinese millers agreed to pay Anglo-Australian miner Rio Tinto up to 96.5 per cent more for their ore supplies this year, the largest ever annual increase and well above the 9.5 per cent increase paid last year.
The rise suggests that demand for commodities from emerging economies remains strong in spite of the US slowdown, fuelling fears that global inflation will continue to rise. The rise - an average 85 per cent - surpasses the record increase of 71.5 per cent agreed in 2005 when the commodities boom gathered pace.
“Commodity-led inflation risks appear to be growing,” said Tobias Levkovich, Citi chief strategist.
Sam Walsh, chief executive of Rio’s iron ore unit, said the agreement indicated ongoing robust demand for commodities. “Economic growth in China, India and the Middle East continues to be outstandingly strong.”
Chinese companies have been working on ultra cheap cars for the past few months, the QQ2, F1, Panda, etc have all been shown off at various motoring shows, or on CCT. The question remains, will these cars remain cheap as they are or will the cost of motoring spiral out of control?
The price increases in raw materials are quite substantial and will get passed onto consumers. If you were thinking of buying a new car, now’s the time to buy.