In commodity news, Rio Tinto agreed to slash iron ore prices in a deal with Japan's Nippon Steel by at least 33%.
Tuesday's move by Alcoa follows Monday's decision by Australian iron ore miners Rio Tinto and Fortescue Metals Group to cut their annual production by 10.0% due to weakening demand from China.
After months of negotiations, China's steelmakers agreed to pay up to double the price for the iron ore they buy from Rio Tinto, the biggest-ever annual rise in the cost of the commodity.
My portfolio covers copper, iron ore and coal, namely Rio Tinto--making new highs.
As China builds its inventories and global production rises from heavyweights like Vale, Rio Tinto and BHP Billiton, we expect average prices for iron ore to drop off in the coming years.
The glut of iron ore developing in the international market is good news for steel consumers such as car makers and builders but will hit the profits of BHP Billiton, Rio Tinto and Vale, the big three of the seaborne iron ore trade.
BHP, Rio Tinto and Brazilian mining company Vale are the top three suppliers of iron ore to China.
In addition, as Australia-based Forbes contributor Tim Treadgold pointed out, iron ore prices are falling, with both BHP and Rio Tinto forecasting lower prices in the future as supply rises to meet demand.
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While it appears a truism to state that commodity prices are set to continue their bull runs in the first half of 2011, a more precise look coming from one of the most interested parties in the game, Rio Tinto, provides additional support and key insight into risks facing prices for iron ore, coal, copper, and aluminum.
FORBES: Watch Out In Iron Ore, Coal, Copper When Easy Money Policies Are Done, Says Rio Tinto
Rio Tinto ( RTP - news - people ) increased its forecast for iron ore production on the back of strong demand from China.
Chief executive Tom Albanese stepped down by mutual agreement with the board, Rio Tinto said, and has been replaced by Sam Walsh, chief executive of the miner's iron ore business.
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Rival Rio Tinto Ltd. added 1.4% after reporting a more modest 2% gain in quarterly iron-ore output.
Last week, mining giant BHP Billiton approached rival Rio Tinto with a takeover proposal that would create a company that controlled about 27% of the world market for iron ore.
In a meeting with analysts and investors, Rio Tinto CEO, Sam Walsh, said that the company will most likely go ahead with its proposal to expand iron ore production over the next few years, barring a major structural change in the market.
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