Rio Tinto plc (ADR) [[RTP]] is looking to jack iron ore prices by 40%, according to recent reports. Your iron ore plays are Rio Tinto plc (ADR) [[RTP]] , [[VALE]] and BHP Billiton Limited (ADR) [[BHP]] . Producers of iron ore pellets include United States Steel Corporation [[X]] and Cleveland-Cliffs Inc [[CLF]] . However, in addition to that, this means pricing power is coming back to the commodity space. Look for those costs to get passed down the line, all the way down to you—the retail dipshit.
Based upon the return of pricing power, throughout 2010, I favour [sic] the entire iron/ore/steel sector. Names like POSCO (ADR) [[PKX]] , AK Steel Holding Corporation [[AKS]] , Nucor Corporation [[NUE]] and United States Steel Corporation [[X]] are names that will be bought aggressively, as the world economy recovers. Naturally, these names are subject to wild price fluctuations. Nevertheless, it’s worth noting the real time changes in the industry are looking increasingly, and might I add exceedingly, positive.
NOTE: Analysts predict record steel demand in 2010 (35% yoy increase). I believe that is the biggest one year jump ever. However, don’t quote me on that. I read a lot of research and for some reason that stuck in my head.
If you enjoy the content at iBankCoin, please follow us on Twitter
fig
Aren’t you worried about the China limiting bank loans, increasing rates? Most importantly, a possible bubble?
Top PICK: Long General Tsao Spicy Chicken
Mike
No
not to beat a dead horse but…”Reuters reports German salt miner K+S said a January price cut for its main product potash has triggered strong demand from fertilizer wholesalers, adding to signals that the embattled market for the key crop nutrient is recovering. “Since the price change we are seeing very strong demand. The new price is being accepted,” a K+S spokesman said on Wednesday. It remains to be seen, however, whether European farmers, who are due to start applying potash to fields in the spring, will follow suit, he added. The shares extended gains and were up 2.7 percent at 43.1 euros at 1125 GMT, while Germany’s benchmark DAX was up 0.2 percent. The recent spell of cold weather and snow have led to some disruptions in hauling fertilizer products to ports and to wholesalers, the spokesman also said. K+S, the world’s fourth-largest potash supplier, said on Jan. 8 the potash price might have bottomed out after cutting prices to 285 euros ($396.5) per tonne for Europe, its largest market. K+S planned to raise the price to at least 295 euros per tonne in March, it said at the time. (IPI, MOS).” in sqm, cmp , mos, pot
Ag Chems doing well today: POT, MOS, CF, CGA, TRA, CMP, SYT, etc.
more to your point…Compass Minerals announces price increase on sulfate of potash specialty fertilizer (65.89 +0.39) : Great Salt Lake Minerals, a subsidiary of Compass Minerals (CMP), has announced a $30 per-short-ton increase in the selling price of all sulfate of potash specialty fertilizer products effective with shipments on April 1, 2010, or as contracts allow. This increase will apply to both standard and granulated products shipped to all locations worldwide.
Picked up some TRA (among largest North American producers of ammonia) this morning. Price is bouncing off daily 50 ema very nicely with buy divergence to back it up. It’s a 10 PE stock that has 300M Debt, but 1B cash. ROE >28, ROA > 12, Short Interest approx 4%, Operating Cash Flow > 400M.
Your local meth lab owner will appreciate your investment in TRA.
Alert! Possible very short term silver divergence with gold now over 67.2X the price of silver.
I’m adding to silver positions this morning and throughout the day.
________________
I am looking for Gold/Oil to move higher, the indexes to break upwards out of their bases and the VIx to move down further. I believe the dollar will eventually sink further.
I believe tomorrow will demonstrate that we have hit the pivot on unemployment. History has demonstrated that once we hit the pivot then the market will usually rally from that point on for the next 2 years.
http://bit.ly/9aQa9R
Let me get this straight….
Input costs for steel makers are going up. Raw material cost pressure is building up.
Steel customers, in order of consumption magnitude, are probably the auto industry, construction companies, packaging industry, and drilling rigs.
My questions is, how do you automatically see higher margins for some of the steel names? In other words, yes, the raw material mining companies (RTP, BHP) should do better, but US Steel…NUE…?
i don’t see how they’re going to be able to pass along these increases to industries/bankrupt states that are still sliding south…
So while I don’t see higher margins for steel producers, the case for the raw material mining companies is clear. Seems that BUCY and JOYG would be better plays than the Steel retailers. Also, an increase of this magnitude will launch a global stampede for cheaper iron ore. Countries will introduce export taxes on their ore to both protect their markets and help their own steel companies.
Ore, pellets, coke, etc are long term agreements. Many of the steel manufacturers are vertically integrated, producing some of their own inputs, to lessen the reliance up the chain. These inputs have been PILING UP for 2 years now. Additionally, much of the non-produced input is chinese and polish import, which are a bit detached form the North American, pricing wise.
I think the best plays on this news are DRYS, PRGN, etc.
But X and NUE are in great shape.
Isn’t NUE a lot like STLD in that they buy scrap steel for reproduction ? Scrap prices rising should squeeze their margins, no?
Scrap is an “ingredient” that is used by everybody, and it makes up a small percentage of the input. Non-factor for the most part.
Sebaco
Historically, when prices rise the mills are able to pass the cost down the line. I do not think this time will be different.
CMI Cummins announces a multiyear extension of its current agreement with Chrysler Group (52.38 +1.29)
Co announces a multiyear extension of its current agreement with Chrysler Group. Cummins will supply 6.7-liter Turbo Diesel engines for Ram Heavy Duty pickups and Chassis Cab trucks while continuing to grow its partnership with Chrysler, which began 21 years ago.
I don’t think the current selling stampede is done. I figure as of yesterday we’re 10 completed trading sessions into a stampede with the average stampede lasting 22 trading sessions before the selling ends. I think the last 2 days are what Jeff Saut would refer to as the obligatory mid-stampede throwback rally.
For comp’s sake, the June/July 2009 stampede lasted 19 trading sessions before the selling ended and the S&P lost a total of 7.2% by trading sesssion 19. The mid-stampede throwback rally in June/July occurred on trading sessions 8 and 9 . From trading sessions 10 thru 19 the S&P lost an additional 4.5%.
fid
Quick primer on iron ore trading.
http://in.reuters.com/article/domesticNews/idINSGE60H01P20100120?pageNumber=1&virtualBrandChannel=0