The fluttering butterfly wings from Perth influenced the 2005 "Long-term Cooperation Agreement" negotiations held in Tokyo, Asia.
As the news spread, iron ore producers represented by the three major mines collectively fell silent.
The leaders of Zhongzhi Group from China are overjoyed. The super heavyweight development project of FMG Resources Company is undoubtedly a weight and a great benefit, and will affect the balance of iron ore supply in the entire world.
Previously, in the "long-term agreement" negotiations that were similar to brown sugar, Australia's BHP Billiton, Rio Tinto and Brazil's Vale held an extremely tough stance and insisted on the target of a 25% price increase without wavering.
After more than two months of tug-of-war negotiations, the world's No. 1 South Korean Posco and the world's No. 2 Nippon Steel have softened their stances and are inclined to fully accept the exploitation of the three major mines, agreeing to this harsh price increase plan.
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For South Korea and Japan, they have varying amounts of equity investment in the three major mines, and the overall positioning of steel products is high, new and special, and their ability to bear the price of iron ore is much higher than that of Chinese steel companies.
South Korea and Japan have invested in three major mines, which means that raising prices is not a bad thing. It is relatively acceptable to compensate for internal losses and make up for external losses.
None of these advantages exist for Chinese steel companies.
Therefore, China MCC is the only one that insists on not giving up, insisting that the price increase can only be limited to the limit of 16.5%.
In fact, facing the three giants with the right to speak in iron ore, China Metallurgical Group has almost no resistance. If the Japanese and Korean negotiators accept the "long-term agreement" negotiations with a price increase of 25%, MCC will eventually be unable to do so.
Not accepted.
It is a certainty that the three major mining giants will not negotiate alone with Chinese representatives on the "Long-Term Agreement", a world-wide price benchmark.
For MCC, which negotiates on behalf of many domestic steel companies, there are only two choices: accept or not. Failure to accept this option is a dead end, and you will still have to succumb to the "long-term agreement" price in the end.
It is entirely conceivable that MCC is under heavy pressure;
If the "long-term agreement" price increase of 25% for iron ore is spread back to China, it will inevitably cause an uproar and criticism, and will lead to a general rise in steel prices, and steel companies will generally fall into small profits or even losses.
Taking the rebar and strip steel required for bulk construction as an example, the profit margin is generally between 9% and 11.5%. The profit margin of large marine sheets and cold-rolled plates does not exceed 16%. These varieties account for the majority of the output of domestic steel companies.
Seventy percent.
What does a 25% price increase mean?
This means that the entire Huaxia Steel industry is losing money. Tens of millions of steel workers working for the three major mines will spit out almost all profits. This is a catastrophe for the entire industry.
The super heavyweight development project of FMG Resources Company is a timely rain that nourishes the hearts of MCC Group’s frontline negotiators and greatly increases their confidence.
Although FMG Resources’ first shipment of ore will be produced in two years.
The far-reaching influence it can bring to the world's bulk mineral industry has begun to ferment and expand, affecting the crucial "long-term agreement" negotiations, and will certainly affect the world's mineral resource supply pattern in the future.
Tokyo
In a deep Japanese-style manor.
"What should we do now? Will we fail in our efforts?"
"Raymond, negotiation is a process of mutual compromise. I think an increase of 17% or 18% is an appropriate figure. Iron ore is a bulk means of production industry and has a strong pulling power for the rise in global price levels. There is no need for it.
Excessive pursuit of huge profits.”
"Mr. Mitsui, I cannot agree with your statement. As a businessman, why can't you make profits?"
"There is an idiom in China that goes: A thin stream flows long, so please be patient and don't be impatient."
"I can't sit still anymore, Mr. Mitsui. This is a good thing your allies have done, which has ruined the overall pace of negotiations for the three major mines. We will strongly protest against this and hope that you can carefully consider cooperating with the Wang Consortium. This
Just the worst thing."
Raymond, the president of BHP Billiton, was so angry that he couldn't help venting his complaints on Mitsui Takaunaga. Sanchez Piano, the chairman of Vale, took a sip of tea calmly and did not want to get involved in their debate.
In the elegant living room, Paul Skinner, chairman of Rio Tinto, looked gloomy and looked at the blue sky outside, not knowing what he was thinking in his mind.
These four decisively influential bosses met secretly, and because of their incessantly complicated interests, the Mitsui Consortium had huge investments in these three mining giants.
Take Vale for example;
The Mitsui Consortium apparently holds 18.5% of the shares, but actually holds more than 27% of the shares through affiliated companies, ranking second after the Brazilian government and having a decisive say in Vale.
After the news of FMG Resources’ super-heavy development project came out, these behind-the-scenes bosses could no longer sit still.
They rushed to Tokyo one after another and held a secret meeting here to try to find a feasible plan.
Raymond was slightly agitated, walking around the room with his hands on his waist, chattering endlessly;
"This is really not good news for us. I don't understand how all of this happened. The Royal Family Fund is a high-tech industry consortium that can make a lot of money from Americans. How can it suddenly be interested in minerals?"
Resources are of interest.”
After saying that, Raymond looked at Mitsui Gaochang with doubtful eyes, trying to find the answer from him.
Mitsui, who had a long and smooth face, took a sip of tea with a calm expression and said;
“According to the report of Mitsui Keizai Research Institute, 2004 is the best time to intervene in the field of bulk resources. This comes from the Mitsui Foundation’s decades of continuous investment experience in the field of mineral resources.
As a collaborative ally, we shared this discovery with the Royal Family Fund.
Wang Sang deserves to be a genius that has emerged in the world's business world in decades. He actually has such great courage to invest huge sums of money. I really appreciate him more and more."
Hearing this, Raymond looked at Vale Chairman Sanchez Piano with shock and anger, indicating that he should come out and say a few words.
Sanchez Piano sighed leisurely, put down the tea cup in his hand and said;
"Mitsui-kun, Lord Wang Yaocheng is not a harmless little white rabbit. He is a lion ready to eat people. He rashly entered the small circle of iron ore and relied on his deep and unfathomable power.
The deep financial resources of the Chinese government are too great a threat to us."
"That's true. The Wang Consortium owns the behemoth HSBC Bank. None of us can be his opponent in a head-on battle. The Mitsui Consortium has far-reaching plans in the iron ore field. I'm afraid you don't want to see this situation either."
"This is a production capacity of 150 million tons, which would be a disaster in the world iron ore market."
"Last year, FMG Chairman Cairns Forrester proposed a 55-million-ton project plan. People from Sydney to Rio de Janeiro thought this guy was crazy and no one believed he could complete this project. But now the Wang Consortium has built a 150-million-ton production capacity.
, the entire industry is silent, what is going on in this world?”
"Either we are crazy, or the world is crazy."
The three CEO-level figures complained one after another, showing their fear of the Royal Family Fund. It felt like an elephant had broken into the glassware store and disrupted the original market structure minute by minute.
Mitsui's face was calm and expressionless, and Diamond's madness was simply ridiculous, explaining how disgusting and ineffective a person is when he is greedy.
As a large-scale transaction, iron ore transactions often start with millions of tons, which means that for every dollar increase in price, buyers will pay millions of dollars more.
The "long-term agreement" price negotiated in 2004 was US$42 per ton, and the international trade volume for the year reached 550 million tons. If the unit price increased by 20%, international buyers would have to pay an additional US$4.6 billion. If the unit price increased by 25%, they would have to pay more.
many.
For the three major mines that control more than 70% of international trade, all this is pure profit, but it still cannot satisfy their greedy appetite.
As the shadow giant behind the steel trade, the Mitsui Consortium has invested varying amounts of money in 24 of the world's top mines, ranging from 2% to 3% to as much as 10% to 15%. It has been deeply involved in the industry for decades, which has led to
Came a huge influence.
Simply speaking, the economic benefits are not that great. Investment in iron ore mines is only worth US$700 to US$800 million per year.
This amount of money is Nippon Steel's profit for a quarter and Toyota's profit for half a month. The Mitsui Consortium does not take it seriously at all, but it is an indispensable part of the entire industry chain strategy.
From iron ore powder to steel products, from cars to home appliances, from ships to warships, from machine tools to high-precision equipment, from nuclear power plants to offshore drilling platforms, the Mitsui Consortium is a major consumer of steel.
Grasping the supply of upstream raw materials is an urgent need, and at the same time, it will bring great influence to the international community.
These are what the Mitsui Foundation values most.
"Everyone, please stop. In view of the new changes in the international market, Nippon Steel feels that China's plan is more appropriate. We will also persuade Posco to act together and agree with China's 16.5% price increase plan."
Mitsui Takacho was not in the mood to play with these people anymore, so he simply threw out his trump card;
"We all know that China's steel demand is increasing year by year. In 2004, it increased by 15% compared with the previous year, and 169 million tons of iron ore were imported throughout the year.
It is expected that demand will increase by 15% to 18% in 2005, and the demand for iron ore will not exceed 200 million tons.
From the supply side, FMG Resources suddenly has a production capacity of 150 million tons and will be put into the international market in 2006. I think everyone knows what this means.
Therefore, I suggest that the price increase should be adequate and accept China's plan.
Gentlemen, let me remind you again;
Please do not push all high-quality customers into the arms of FMG Resources, and do not sacrifice the good for the weak. This is a taboo for company operations."
These words caused the three people present to think deeply.
Is there a shortage of iron ore resources in the world?
Of course there is no shortage, on the contrary there is plenty.
Is there a lack of iron ore production capacity in the world?
The answer is that there is no shortage, and there is also plenty. As long as the infrastructure can keep up, the three major mines can expand their production capacity by 50 million to 100 million tons every minute. This is by no means bragging.
But why is it only producing 500-600 million tons of iron ore every year?
Because there is only so much demand for iron ore in the world, in this era of monopoly operations by the three major mines, the balance between production and demand is deliberately maintained. The ultimate goal is to maintain a balance in the price of iron ore powder to avoid vicious competition among each other.