At Forbes, Robert Miller writes:

Another battle may be shaping up between China and Japan. This time, it's over iron ore.

Both nations have an acute need for the product. Indeed, it is China's enormous appetite for iron ore (about 500 million tons a year or more) that has been the major factor behind the recent enormous price increases and profits in the iron-ore industry around the world. Over the last three years alone, members of the iron-ore cartel--Brazil's CVRD (nyse: RIO - news - people ), Australian-based BHP Billiton (nyse: BBL - news - people ) and British-based Rio Tinto Group (nyse: RTP - news - people )--have raised iron-ore prices by, successively, 70%, 19%, 9.5% and for 2008, an estimated 50%.

Without China's voracious need for iron ore, such huge price increases would have been impossible. Although China has some iron-ore reserves, the quality and quantity of those reserves is lacking. Japan, like China, is also a net importer of iron ore for its steel industry, as Japan has no domestic reserves.

Enter British-based Rio Tinto, one of the world's major producers of this very much in-demand product. Against the backdrop of the company's board rejecting the recent unsolicited offer by Australian-based producer BHP, Rio's stock price has shot up to never-before-seen levels, as shareholders clearly anticipate either a higher offer by BHP or a white knight entering the fray.

To read more:

http://www.forbes.com/2007/11/20/china-japan-iron-oped-cx_rmm_1121iron.html?partner=commentary_newsletter