I am very impressed by your ability to cut and paste
articles to support your argument, however if anybody
with basic material engineering background were
to read your little "genius" idea about
replacing iron or steel in construction industry with a
cheaper mineral, they will be laughing their heads off.
To proof my point, I would like to ask you, based on your
knowledge on material, can you tell us which metal do you
think has very similar or better mechanical properties as
iron and is economically viable to replace iron?
Sands? Although they are use in construction industry, but they
are very different in the nature as compared to mining for iron ore
and coal because
1) They are not an internationally traded commodity
2) Easily collected from the riverbed with simple crane and
bardge
3) They dont need expensive processing to turn ore into
steel
4) There are many supplier in the market.
In an oligopoly, there is always the dominant company and they
are usually the price leader. Just like when Phillip Morris
annouce price adjustment for their Marlboro brands, all other
premium tobacco companies will follow.
There to 2 things which the steel mills and mining companies
negotiate, PRICE and ALLOCATION, and such negotiations are done on
a quarterly basis.
In a seller market, such negotiation can become
very complex. e.g. mining companies can offer the mills
an attractive price, but they might not necessary give them
quantity you need to keep their mills running.
At the moment, it is the seller market and China being
the largest importer of iron ore in the world, despite them being
one of the largest producer, are taken hostage by these mining
companies. And that is the reason why the recent move by
BHP to acquire Rio Tinto is causing so much fear to the
Chinese government.
Back to my point about dictating price, suppose if China (the
largest buyer in the world) is to acquire Rio Tinto, they will
not have allocation worries and they will be able to dictate the
price as they will become both buyer and seller.
Another thing which you might want to know is that
buying iron ore and coal is not like how you will do your
grocery shopping where you can switch brands anytime you like
because iron ore do comes in different grade. And
the orgin of the material will also affect have an impact
on the cost because transportation is a big cost component in
this business.
The business dealing between companies in the mining and
steel industry is a very complex one, and one which you
cant simply use elementary case study (like the one
above) to represent.
Right now abundant use of iron for construction material is because
of it's is cheap and in abundance. Like you said, if it should come
to a point where prices are dictated and it becomes prohibitively
expensive, obviously the construction industry will find
substitutes for it. The world is dynamic, nothing stands still,
everyday new things are invented. In the 1900s, who would ever
thought it was possible to fly to the moon. I am very confident
that if there should ever be a point in time where prices of iron
becomes too expensive or scarce, there will be workarounds, nobody
is going to sit on their arse and say "since we don't have any
more iron, we can't build any more buildings or bridges".
Maybe you can answer this. What happens if our non-renewable
iron runs out? Is the world just going to stop building cars,
buildings and bridges? Or are we going to find substitutes?
Take knives for example, which is traditionally formed by steel,
these days you find ceramic knives with better cutting
qualities.
There are substitutes for iron and steel, it's just that cost is
prohibitive, should there ever come a time where the cost of iron
becomes too expensive or scarce, rest assured that substitutes will
be used. Like what we are doing with vehicles now, we try to find
substitutes (e.g. CNG vehicles, bio diesel) from the
traditional petrol derived from crude oil.
Perhaps you should read to understand. I was using sand as an
example of find other substitutes, like our construction industry
faced with shortage of sand last year, tries to limit the use of
sand by substituting with other construction materials. I
don't know why you give the whole explanation about whether it's a
internationally traded commodity and processing.
Originally posted by me:
"You should know better, sand which is a major component of
buildings was banned by the Indonesian government, but still we
managed to place less reliance on sand and search for other
alternatives. You should understand the human endeavour, whenever
there is an obstacle, humans will certainly find ways to work
around that obstacle. Surely, when all our non-renewable resources
are used up, you don't expect humans to just sit there and say "now
that there is no oil (or any other non-renewable resources), we
will just sit here and die", without thinking of any alternative
solutions."
Your explanation:
Sands? Although they are use in construction industry, but they
are very different in the nature as compared to mining for iron ore
and coal because
1) They are not an internationally traded commodity
2) Easily collected from the riverbed with simple crane and
bardge
3) They dont need expensive processing to turn ore into
steel
4) There are many supplier in the market.
Do you have comprehension problems?
You mean cigarettes are similar to generic iron or steel?
Cigarettes from every brand taste the same? Not necessary
that once Phillip Morris, other cigarette companies will follow
suit everytime, sometimes other cigarette companies don't increase
prices even though Phillip Morris increased their prices. If you
are talking about past increases where prices of cigarettes are
raised, most of it was due to parliamentary budget, where taxes of
tobacco was raised. Maybe you can substantiate your arguments with
proof, instead of hypotheticals.
So where is your proof of such quarterly meetings where
countries like China, Brazil, Australia, India, Russia, Ukraine,
US, South Africa, Canada, Sweden, Venezuela, Kazakhstan, Iran and
Mauritania sits down to fix price? You must have read from it
somewhere? Any sources to cite?
So if China takes over Australian Iron mining, they can DICTATE
prices and increase price by 200% or 300%?
If what you say is true, about cigarettes.
Shouldn't all cigarettes be sold at one price? There is only one
clearing price for crude oil in the market.
Since you understand the iron industry and I don't, maybe you
can explain it, I like complexities.
