Iron and Steel Prices set to Rise

Two of the big iron ore oligarchs, Vale of Brazil and BHP Billiton of Australia, have concluded a deal with Japanese, Chinese and South Korean steel mills to switch from annual contracts to more flexible quarterly contracts linked to the iron ore spot market. Essentially, this means that iron miners can renegotiate the prices they charge every three months, and since demand for iron has been skyrocketing because of China's ever expanding hunger for steel, prices are expected to increase by as much as 80-100% over last year at this time. The extra costs will most certainly be passed on the steel consumers. Yesterday, EU steelmakers represented in Eurofer demanded that the European Commission investigate the top three iron producers (the two previously mentioned and also Rio-Tinto) for possible anti-competitive practices meant to choke off iron supply in order to raise profits.

First and foremost, in spite of the complaints of steel makers and steel consumers, iron prices have to go up. There is too much increasing demand from Asia for there not be a price hike, at least in the short run. In the long run, provided that the top three iron extractors are not a cartel, increased revenue should provide an incentive for them to increase production and lower prices over time. The quarterly contracts will lead to more price volatility; and personally I am a bit worried that this may hurt some of the smaller economies who export iron (Mauritania and Kazakhstan for example) even though they will get more money for their exports. The market volatility will make expansions better but recessions all the worse.

My second comment is actually a question: what are the anti-trust rules governing corporations at the international level? Monopolies are (sometimes) discouraged within free-market oriented economies, but what is to prevent a corporation from operating a cartel or a monopoly in a global market? I'm pretty sure there are some WTO rules concerning this, but I don't know what they are.