A lump of iron has just doubled in price and while Rio Tinto laughs all the way to the bank, Chinese steelmakers weep into their green tea. We should resist Schadenfreude at the sight of anyone legging over a Chinese manufacturer. Expensive iron ore plus dear coal equals costly steel - be it cars, computers or microwave ovens, we shall pay for the expensive minerals in the end.

It is bizarre that the price of crude oil has excited so much hysteria about market manipulation while no one questions the negotiations over annual iron ore supply contracts. It's a ritual, a lengthy dance between the major steelmakers and three miners - Rio, BHP Billiton and Vale, of Brazil. The trio control two thirds of the seaborne iron ore market, and this year it has been more contentious, not only because prices in the thinly traded spot market have shot skywards but because BHP has made an offer for Rio.

The trio used to agree almost identical price uplifts, but this year Rio held out for more arguing that the cost of shipping Brazilian ore to China, double the rate from Australia, ought to be reflected in a better price for Australian ore. Rio won the argument and it might just win its independence because the world has begun to notice this obscure but vital market in the red rock of Australia's Pilbara.

Iron ore is not valuable - it's the vast pits, the huge trucks, the railroads, ports and the enormous ships. It's the sheer scale of the operations of BHP, Rio and Vale that make the product valuable. The question is do we want to make them even bigger?

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