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March 31, 2010

BELGIUM: ACEA ‘concerned’ by price hike in iron ore

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.

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.

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