Commenting, Ian Christmas, worldsteel's Director General said, The benchmark system may have imperfections but it has the merit of supporting long-term relationships between the steel industry and raw materials suppliers leading to beneficial medium-term investment decisions. The implied move to spot pricing will be volatile and benefit neither side in the medium to long term.
The ability of the mining companies to impose this change which maximises their short-run profits, comes from the uncompetitive market for sea-borne iron ore. Just three companies dominate this business with the major Brazilian supplier having a virtual monopoly in the Atlantic basin and the two major Australian companies having a virtual monopoly in the Pacific basin. The two Australian companies now propose to merge their Western Australian mining operations. Three mining majors control over 68 percent of the sea-borne iron ore supplies-- Vale 32.8%, Rio Tinto 18.6%, BHP Billiton, 17.1%, worldsteel said.
Concluding he said, There is now an urgent need for the competition authorities around the world to examine the market for iron ore, and the market behaviour of the three companies who dominate the business. They need to decide whether the uncompetitive nature of this business is in the public interest given that steel is used in virtually every aspect of the modern economy.