by Brian Cody

Created on: May 28, 2009   Last Updated: June 04, 2009

The world's number 2 steel producer Rio Tinto (Rio) current stock price as of 5/27/09 is $170.00 announced that the company has forged a price cut deal with the Japanese steel company Nippon Steel (Nistf), current stock price as of 5/27/09, $3.5 see (Pink sheets) for details. The price will be a 33% reduction.

The major steel player in China is a company called Baoshan Iron & Steel ( Baosf). That company is resisting and fighting the proposed price cut. Normally, the Chinese steel companies will endorse and go along with the price recommendations from the Japanese steel makers.

Rio Tinto (Rio) 52 week price range is a low price of $59.20 with a high price of $499.79. The long term debt for (Rio) is 144.03% while the industry average long term debt is 46.84%. The Return of Sales (ROS) for (Rio) is -8.91% with an industry average of -20.92%. The Return of Equity (ROE) for (Rio) is -46.73%.

The overall effect of this price reduction by Rio Tinto (RIO) will be a dampening effect upon the ability for the steel industry to increase their prices moving forward. In the North America steel market the following companies will be impacted;

Cliff Natural Resources (CLF) current stock price of $25.16 as of 5/27/09, with a 52 week stock price range of a high of $122.95 and a low price of $11.80, (CLF) will have to drop its production price. Cliff Natural Resources is the largest producer of Iron ore pellets in North America. The company (Clf) uses the following formula for achieving its prices; the price of pellets, the current price of steel, and the cost of production to the company.

The US steel company AK steel holding (AK) has a heavy reliance on outside purchase contracts for Iron Ore and their major contract is with Cliff Natural Resources. (AK) current price is $13.57 as of 5/27/09. The 52 week High price is $72.99 the low Price is $5.20. Goldman Saks and Columbine Capital service recently upgraded (AK) steel from unfavorable to neutral. Meanwhile, Thompson Financial rated (AK) from a hold to a sell.

US Steel (X) current price of $31.78 as of 5/27/2009. The 52 week high and low price for (X) is a high price of $196, and a low price of $16.60. US Steel does not have a heavy reliance for outside Iron ore pellets.

With the US economy starting to come out of one of the longest recession in recent history. There will be a demand for steel products. The price cut will help keep the inflation down due to the dampening effect upon the steel industry.

The federal stimulus program will help build and fix our infrastructure. The built up demand from China will also help the steel industry. You might want to consider purchasing some of these companies on any price dip of 15% to 25%.

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