For many years the iron-ore trade was uneventful, but at least stable. Contracts, usually made between Japanese steelmakers and Australian miners, generally left little of the fluctuation that we see plaguing other commodities such as oil. As has historically been the case, the profit margins for iron ore miners was thin, however the consistency was at least one silver lining for all of those involved in the steel and iron industry, not just those dealing steel in Houston TX.
However, this situation has been headed toward change, spurred by two consecutive upheavals. The first change would definitely be China’s economic boom which sent demand, as well as ore prices pretty high. The other, which was more abrupt, was the global recession. These together caused panic in the iron industry. Contracts that had been stable for years were suddenly too inflexible to handle such volatility. The result of these factors is that a system of spot trading arose. As China’s economy began to again prosper, the spot price duly rose. Prices were almost three times higher than their mid recession low by 2011. However, flexibility can cut both ways.
Analysts have long been forecasting a decline in the price of iron ore and steel in Houston TX, but the slide was more rapid than expected. This fall has been further encouraged by the new low cost supplies that Brazil and Australia have been developing and pushing. These and other developments have seen many of the big mining companies enjoy a 15% growth period.
China’s demand for steel, which is the prime mover of the iron-ore price in the past has knocked off some. This has been due to credit restrictions on contractors. The restrictions were originally put in place to restrain China’s hyperactive housing sector, however, the restrictions may have had other consequences that were unforeseen.
The lower prices that are being seen globally, will hopefully start to force the higher cost producers out, so that more cost effective iron and steel manufacturers and U.S. based steel dealers can continue to grow. All of these changes in addition to the construction boom slowly blossoming in the U.S. could mean good things for the steel industry in the near future. No one could have foreseen the toll that the recession would have taken on the building sector. Now even though many contractors and even investors still feel shy about large scale building projects, confidence is growing not only for contractors and investors but also for those who supply steel for these projects. Confidence means more stable prices and better supply reliability for those who need steel in the major U.S. cities and those who need steel in Houston TX.