The European auto industry trade association ACEA says it is very concerned by the sudden and massive increase in the price of iron ore, a crucial material for producing steel.
It says that the leading iron ore exporters announced, yesterday, steps to raise their prices by more than 80%.
ACEA maintains that such excessive and unpredictable pricing policy would affect the competitiveness of manufacturing in Europe, including the automotive industry.
“The automobile industry needs broad access to raw materials at competitive conditions, especially in times of fragile economic circumstances,” the trade association said in a statement.
With roughly one tonne of steel per car, the automotive sector is a major steel industry customer.
Cost pressures in the sector are already high, ACEA argues, due to large investments in environmental and safety technologies.
ACEA says that the main iron ore exporters are Australia’s Rio Tinto, Brazil’s CVRD and Australia BHP Billiton (often called the ‘big three’). Major producers like India and Russia hardly export their iron ore. The ‘big three’ represent around 70% of the exports of iron ore and, subsequently, hold the significant pricing power of an oligopoly.
In addition, BHP and Rio Tinto have announced their intention to create a joint venture and merge their Australian iron ore productions, leading to further concentration, ACEA notes.