Iron-Ore Prices Rise — But Shine For Some Companies

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While the rise in iron-ore prices will hurt steelmakers without their own iron resources, steelmakers with their own iron-ore are possibly about to hit payday ” along with company investors. OneSteel of Australia, for example, was recently featured in an Andrew Harrison article in the Wall Street Journal as one of the few steelmaking companies that won’t be affected by the higher prices of iron-ore. Approximately 98 percent of iron ore is used to make steel, and the product is vital to the steelmaking industry. OneSteel is particularly self-sufficient in this regard and, unlike other companies, not left brawling for the critical raw material. Instead, OneSteel boasts of its own mines that are basically neighbors to its steelworks site in South Australia.

OneSteel, Australia’s second-largest steelmaker, isn’t your typical steel company, reports One Steel Chief Executive Geoff Plummer. Formerly part of BHP, OneSteel became an offshoot from the company in 2000, two years before the largest steelmaker in the country, BlueScope Steel, did the same. Rather than just making steel, Harrison explains in his article, OneSteel is one of the few global steelmakers involved in everything from iron-ore extraction to scrap recycling and product distribution. Since it’s rumored that iron-ore prices could soar as much as 50 percent this year, the company – with its mines, durable assets, and quality management – is looking like a win to investors.

Since not all companies are blessed with their own mines, other groups are taking more unique approaches, looking to new and unusual places for iron-ore. Mining and resources group Rio Tinto is also getting involved in the iron-ore situation, as was noted in a recent article in The Australian. The article declared that Rio Tinto is looking to do what its rival BHP Billiton has failed to do — develop a new iron ore export business out of India despite that Government’s focus on husbanding ore for local steel production. This looks to be a fascinating possibility, particularly after reports that Chinese steel mills are losing negotiating prices with miners. The more possibilities, the better, some might say. But steelmakers such as OneSteel have it the best, since they can find iron-ore in their own backyard.

Amy Edwards

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