From the Wall Street Journal:
Steelmakers Facing Hit
As Miner Wields Clout
Amid Commodity Boom
In a move that could boost its profit but raise costs for its largest customers, mining titan Rio Tinto plans to charge steelmakers higher market prices for some crucial raw materials, despite long-term price contracts.
The move marks an effort by the mining company to capture higher spot-market prices for iron ore, a key steelmaking ingredient. It illustrates the clout mining companies have amassed during the four-year boom in commodities.
Rio Tinto's move would affect 10% of the iron ore it supplies to long-term customers. Those customers, who currently pay about $75 to $85 a metric ton, could pay the same prices as on the open spot market, where iron ore is fetching about $180 to $190 a metric ton due to rising demand....MOREFrom The Australian:
One analyst team predicts BHP Billiton will lift its offer to 3.5 BHP shares for each Rio Tinto share.
But another analyst said it would not matter all that much if BHP walked away: there would be a short-term fall in the stock price but within three years Rio's value would have surged to eclipse the present value.
A third said the big production surge in the last three months of 2007 was irrelevant, because BHP would not base its valuations on that, but rather Rio's longer-term performance. Figures were being re-crunched yesterday after the Wednesday release of Rio production reports covering the December quarter and all of 2007, which showed the global miner set new output records for iron ore, refined copper, bauxite, alumina, aluminium and gold.
It was not just the raw numbers that mattered so much as what effect they would have on BHP's takeover desires. That desire, expressed so far only in informal terms, was based on three BHP shares for each Rio share.
But Stock Resource analyst team Steve Bartrop and Grant Craighead sent out their weekly client round-up, which included a chart that showed Rio had consistently traded above the BHP valuation. That margin implied an offer of 3.3 BHP shares....MOREAnd from Reuters:
Focus to shift to raw materials in '08 steel M&A
Steelmakers could focus their acquisition sights on raw materials in 2008, in a bid to reduce costs which are set to climb on the back of higher iron ore prices, a senior industry expert told Reuters this week. The steel industry is bracing for a sixth straight year of iron ore price hikes in 2008 as annual contract talks between the mills and top iron ore producers...MORE