Auto industry concerned by price hike in iron ore

ACEA, the European automobile industry’s trade association, is concerned by the sudden and massive increase in the price of iron ore -- a crucial material for producing steel – and has asked the European Commission and member states to develop and implement a raw-materials strategy to ensure a level playing field on the world’s markets and facilitate broad access to raw materials from third countries at competitive conditions.

The leading iron ore exporters have announced steps to raise their prices by more than 80%. Such excessive and unpredictable pricing policy would affect the competitiveness of manufacturing in Europe, including the automotive industry, according to ACEA.

It believes the automobile industry needs broad access to raw materials at competitive conditions, especially in times of fragile economic circumstances. With roughly one tonne of steel per car, the automotive sector is a major client of the steel industry and – hence, iron ore exports. Cost pressure in the sector is already high due to large investments in environmental and safety technologies, while economic recovery and consumer demand are still slow.

The main iron ore exporters are Australia’s Rio Tinto, Brazil’s CVRD and Australia BHP Billiton. 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.

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