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Tickers in this Article: RIO, BHP, RTP
Companhia Vale do Rio Doce (RIO), BHP Billiton (BHP) and Rio Tinto (RTP) are the top iron ore suppliers of the world. While oil prices continue to steal headlines, China's production and demand for steel has pushed the prices of iron ore (a key ingredient needed to make steel) higher, resulting in record profits for the Brazilian- and Australian-based iron ore miners.

Brazilian-based Companhia Vale do Rio Doce is one of the best iron ore performers in the industry, registering a net income of $10.4 billion, up 62% from the previous year on total revenues of $35 billion in 2005. It's no wonder CVRD is successful given the aggressive prices they negotiate for iron ore. In April 2005, CVRD pushed for and received a 71.5% price increase from China for its iron ore.

Each year, the world's top steel-producing countries including China, Japan and the U.S. meet with the top iron ore suppliers to negotiate a contract price for the year. Led by CVRD, the iron ore miners are pushing for a 24% hike in prices from China this year.

The talks were scheduled to conclude by the 1st of April, but China has been unwilling to accept the price increase in hopes of securing a better deal.

In 2005, China continued to be the both the world's leading producer and user of steel. Worldwide steel production increased 5.9% last year, lead by the continued increase in production by China.

There was much debate in the steel industry in 2005, since China's production threatened to create overcapacity which could hurt steel prices. In an attempt to avoid over-production, China's government has taken steps to scale back production at non-competitive local steel plants. China's government has also aligned major Chinese manufacturers to speak through its largest producer, Shanghai Baosteel Group, during its negotiations with CVRD, BHP Billiton and Rio Tinto.

While the China development story and its massive levels of oil consumption is nothing new, one topic for debate is whether or not steel will continue to grow at such a rapid pace. CVRD CEO Roger Agnelli expects strong growth in the industry to continue for at least the next 4 years.

In order to capture that growth, CVRD made $4.2 billion in investments last year towards expanding mining production capabilities. Looking even further into the future, India, who consumed approximately 40 million tons of steel in 2005, is barely registering on the world production scale, leaving room for highly anticipated growth in their demand for iron ore as development slowly trends upward.

As the build-out continues in the Asia Pacific region, investors interested in commodity stocks should seek out investments beyond oil. CVRD's stock price has risen 17% since the beginning of the year, closing at $48.23 on Tuesday, because it continues to efficiently deliver the resources demanded by the developing world at prices that generate profits.

Given that CVRD is the world's largest iron ore producer and exporter, and given its influence in dictating prices, it is a stock that should benefit investors interested in participating in the future of steel, China and the world.

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