The 71.5 per cent price rise achieved by iron ore producers this week was greeted with wonder and excitement by investors.
And, while it was good news for iron ore producers and their shareholders, the rest of us should be bracing for a dose of cost-of-living reality as those prices flow through the production chain.
Everything from hair clips to motor cars, clothes lines to refrigerators will be affected. Or, at least, they would be affected if the price rises were passed down the chain.
The iron ore producers and steel makers can raise prices almost at will. But the story is different as the metal gets closer to the price-sensitive customer.
Here price rises can become more a dream than a reality and there is already a lot of bleeding in the manufacturing sector which has not been staunched.
The price rises reflected a world shortage of steel over the past 18 months or more and the increasing competition for supplies of what has almost become a semi-precious metal.
Steel prices have been jumping at an alarming rate, with the most common industrial feedstock, hot rolled coil, rising from $US330 to $US630 a tonne in the past 14 months.
The pain has been obvious during this profit season. At least it was if companies could secure steel supplies.
“We have all been struggling, not just with prices, but a lack of availability,” said Bruce Griffiths, chief executive of car parts maker Air International, a Futuris Corp subsidiary. “We have got full-time employees trying continually to source steel.”
[emphasis mine … Michael]
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