In an interesting Reuter's article which was on the news section of this site it states:
$this->bbcode_second_pass_quote('', 'F')or airlines and other transport companies, the effects of higher oil are easily understood. For other sectors, though, it will also have an enormous effect.
"If crude hit $105 it would not be good (for mining)," said Victor Flores, senior mining and gold analyst at HSBC Securities. "Fuel or energy costs are 25 percent of costs in some operations."
The average spot price for gold last year was around $415 per ounce. Flores noted the average cost of mining that gold was $240 per ounce.
PeakOil is You
price of iron ore
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price of iron ore
by ehv_nl » Fri 01 Apr 2005, 06:02:19
Wasn't it common economic theory that led us to belief that higher oilprices would lead to more exploration and more intensive exploitation, since this would be more profitable? I think that higher iron ore prices would mean higher steel prices, which in their term would mean more costs for oil exploitation. That would refute common economic belief, I'd say.
Take a look here:
http://www.dot.state.oh.us/construction ... _PN525.htm
and especially here:
http://business.timesonline.co.uk/artic ... 45,00.html
[quote]Industry sources said that Nippon Steel’s apparent eagerness to agree to the sharp price rise, which they described as “unprecedented in living memoryâ€
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ehv_nl - Wood
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by JBinKC » Fri 01 Apr 2005, 17:44:50
Yes it would have a large negative impact besides macroeconomic demand of the product it would have an impact on the costs of production especially those who process pelleted ore. A very small percentage of the processors use scrap and the electric arc process which I feel is going the be the most cost efficient way to process steel in the era of peak oil.
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JBinKC - Lignite
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Re: price of iron ore
by nth » Fri 01 Apr 2005, 18:57:19
$this->bbcode_second_pass_quote('ehv_nl', '
')Would these price increases only be demand driven? Or would at least a component of these price increase be due to high oil prices?
')Would these price increases only be demand driven? Or would at least a component of these price increase be due to high oil prices?
Prices will increase or decrease are dictated by market supply and demand, but how much it should increase is based on costs, too.
So a seller must have pricing power in order to raise prices. How much should he raise? Unless he is free to just keep raising prices and find out when demand will drop, he is often stuck on predicting what price to sell it for. People often price based on % of cost, until they figure they can charge more and get away from it. If you get repeat customers, they will demand you not rip them off and so justify your prices.
So, I think the price rise can be attributed to demand. Only when you see demand not rising anymore, can you say any subsequent increase is based on costs. without slowing demand or increase in supplies to cover rising demand, it is not possible to know how much rise in price is due to cost.
Your other question is very good question.
A cycle of increasing prices, how that will effect oil exploration?
My guess is that it will make large firms not wanting to explore as they need to invest more money and increasing risk for less returns. Exxon and Chevron executives have basically said all these small new fields being put up for bid to explore are too small for them to jump into in the US. They are only interested in Middle East and Russia and former Soviet Union area where large deposits are to be explored and developed.
So with that info, I would guess we will get more small firms who are more willing to take larger risks and less big firms. Small firms have capital issues, so only a limited amount of exploration can occur, but they will be more aggressive in bidding, so making the big firms just sit around.
As Campbell predicted, the cost to produce crude oil will increase in cost dramatically around PO. We are seeing it now with rising steel prices and other costs.
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nth - Heavy Crude
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