Iron Ore

Think this doesn't make for inflationary pressure in China? The Financial Times reports "Steel Prices to Rocket Under New Contract." The iron ore companies have succeeded in eliminating the system of yearly contracted prices. Instead, prices will be set quarterly according to a spot price. This agreement is a result of bargaining power by the mining companies due to China's demand for raw materials.

I believe that this price increase will continue to fuel the inflation pressure which has started to build in China. What remains to be seen is how the Chinese authorities will respond to further overheating. Thus far, they have clearly followed a policy of easy money. Asset bubbles have been the result. However, generalized price inflation might not be as acceptable to the government as asset bubbles are.