The following is a cut and paste job from the news in Biz Spector. It is quite easy to verify this - just give it time. The next two quarters' report from both Rio/BHP will be telling because I am quite sure the production and sales numbers will reveal what is actually going on. This is something a Rio investors in particular has to pay attention to because of their relatively weak balance sheet.
The following is a cut and paste job from the news in Biz Spector. It is quite easy to verify this - just give it time. The next two quarters' report from both Rio/BHP will be telling because I am quite sure the production and sales numbers will reveal what is actually going on. This is something a Rio investors in particular has to pay attention to because of their relatively weak balance sheet.
Dunno. I would suggest to you the best way to make use of the info is to weigh it up if you are a Rio investor. You can brush it aside, or you can do your own investigation. After all, it's your money.
With regard to you question, always remember this - Australia doesn't have to sell anything to China if she doesn't want to because China would be doing the same - she won't have to buy anything from Australia is she doesn't want to.
Chinese steel mills and trading houses have had to resort to port warehouses as their sole source of spot purchases, with no tender offers by the Australian miners since last week, the sources said.
QUOTE.
Shipping iron ore to China without firm orders doesn't seem such a bad idea, from RIO and BHP's point of view, does it!
QUOTE.
Shipping iron ore to China without firm orders doesn't seem such a bad idea, from RIO and BHP's point of view, does it!
Chinese steel mills and trading houses have had to resort to port warehouses as their sole source of spot purchases, with no tender offers by the Australian miners since last week, the sources said.
QUOTE.
Shipping iron ore to China without firm orders doesn't seem such a bad idea, from RIO and BHP's point of view, does it!
No. It is in fact quite a good idea at the moment. It's the future you have to watch out for - there's another 26 million tons to clear, whilst the Indian has 14 mln; and the Indian seems to have a higher rate of decline - 1.8% vs 1.5%. Ever watch a Fat Loser competition before? The one that loses most fat wins! I think the Indian is well ahead.
In addition, back on WA shore, 5 ships in last two weeks, do you reckon there is a boom going on over there and is "business as usual"?
No order no ship. No ship no sales. No sales cut production. Cut production = job retrenchment?
Try looking further and wider. It's the future you are investing in. Not the past.
Read it here... click me!
** if the news from the Chinese side is correct, bulk of the Rio ore sent to China back in May/June period was sent there without firm order, and the unsold ore is now "parking" in ware houses in various Chinese ports to the tune of about 26mln tonnes.
However, there's also an Australian news talking about ships leaving WA shore are ships with "ordered" ore that has been "paid for" according to a set of complex rules
I guess since it is published in the Australian and from a reputable journo, this news must be "true" and not just a total spin. So yes, let's assume the ore sent to China back in May/June had been paid but yet still available for sales...
And now, with this latest demand softening in China news but excluding the Brazilian ore... etc, the only sensible conclusion here is frankly this question - what does Rio mean by "business as usual"? Or has the Chinese really shot themselves in the foot? Or it is Rio that is really shooting itself in the foot with millions of ton of ore unsold in China?
Time will tell. But if you think a little deeper, it doesn't make a lot of sense with the information provided - for example, Rio is expecting the demand for IO will pick up in H2 and yet there's no increase shipping activities according to BDI movement... make sense?
And with regard to Stern Hu's case, here's from S.Smith...
** a "criminal or judicial investigation", that would make the matter a totally internal Chinese matter and is much easier to convict - not many people realise or want to accept this - the laws governing corruption is quite clear and well defined over there, but the enforcement of such laws is quite inconsistent. Most times it is carried out selectively giving the official a lot of "leeway" in the final decision. If anyone finds it hard to understand or accept over here, may be it will be easier to grasp if one were to equate that with the Aussie version of official discretion in how the FIRB rules are applied.
Fair comparison?
** if the news from the Chinese side is correct, bulk of the Rio ore sent to China back in May/June period was sent there without firm order, and the unsold ore is now "parking" in ware houses in various Chinese ports to the tune of about 26mln tonnes.
However, there's also an Australian news talking about ships leaving WA shore are ships with "ordered" ore that has been "paid for" according to a set of complex rules
I guess since it is published in the Australian and from a reputable journo, this news must be "true" and not just a total spin. So yes, let's assume the ore sent to China back in May/June had been paid but yet still available for sales...
And now, with this latest demand softening in China news but excluding the Brazilian ore... etc, the only sensible conclusion here is frankly this question - what does Rio mean by "business as usual"? Or has the Chinese really shot themselves in the foot? Or it is Rio that is really shooting itself in the foot with millions of ton of ore unsold in China?
Time will tell. But if you think a little deeper, it doesn't make a lot of sense with the information provided - for example, Rio is expecting the demand for IO will pick up in H2 and yet there's no increase shipping activities according to BDI movement... make sense?
And with regard to Stern Hu's case, here's from S.Smith...
** a "criminal or judicial investigation", that would make the matter a totally internal Chinese matter and is much easier to convict - not many people realise or want to accept this - the laws governing corruption is quite clear and well defined over there, but the enforcement of such laws is quite inconsistent. Most times it is carried out selectively giving the official a lot of "leeway" in the final decision. If anyone finds it hard to understand or accept over here, may be it will be easier to grasp if one were to equate that with the Aussie version of official discretion in how the FIRB rules are applied.
Fair comparison?
You are probably right have no idea why it was so out that day. shhhhh it happens. When I was watching I knew it all went hay wire that day. you win some that day I lost some and how.
Sean K
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Out of interest, how are you applying this information?
Is it determining intraday trading of the stock, or just for interest sake?
To put energy into this, it needs to have a real purpose, imo.
And, if it has a purpose, what's the point in splashing it up unless you let us in on the details?
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Agree with kennas.
IF you're gonna trade ADRs you should backtest a bit more first. Nothing like forward testing a new system to lose capital and get confusing feedback.
China over-plays its hand
** this write up is worth a keep because frankly I would like to come back to revisit the views of these market experts say 6 months down the road where the coast is clear or when the "fog of war" is dispersed.
This is the current "mainstream" thinking in Australia which I got to say is edging near a point where if this were to turn out wrong, Australia and its mining giants will be in for some butt kicking.
1) I am no sure if this is done on purpose or not, there is an over-emphasis on EC's approval on the Rio/BHP merger but completely ignoring the Chinese threat of applying their anti-monopoly legislation, thereby setting up a potential for show down with China should the plan go ahead.
Based on the many comments from those who really know how the Chinese work, that the arrest of Stern Hu is a warning to Rio and Australia, indicating how serious and how China will play their hand if their security for commodity is threatened, I don't think I would like to take their actions all these while as just plain empty threat.
How much clearer do the Chinese have to make their point clear?
2) There is some kind of spin being sent out on the Chinese spot market for IO here. So far, only half of the IO sent to China has been sold with the remainder still sitting in the warehouse with no official auction. If there is still Chinese steel mill buying from the market, there is a good chance that they are buying from the Indian and not from the Aussie because of their fear of being linked to the Spygate affair. Can't see how this could be construed as all positive.
3) Even assuming the spot market pricing were to become a fixture instead of contract negotiation, the assumption is still full of flaw because it has not taken into account of what the Chinese are attempting to do at the moment. They are clearing house big time and they are taking a complete audit through the IO market, from the custom dept to all the big steel mills in China through CISA.
The Chinese are so determined to get to the bottom of the whole market and its related manipulation that it is in my view grossly dangerous by assuming business will be as usual in the next IO negotiation and if it were to be deadlocked the spot market will turn up being more advantageous to the big producers. There's no certainty in this claim as far as I can see. Why would it?
The usual readily available market information like production numbers, insider information etc would be hard to come by after the house cleaning; and I doubt if there will be others willing to provide the information to the producers now that they know CISA is watching them closely.
It is really quite foolhardy, if not arrogant to assume it's business as usual, and the big Aussie producers will be better off with a new pricing system.
In my view, the initiative after the Stern Hu incident will go to the Chinese, it's they will be calling the shot, and not the big IO producers. To push on a tough stand, the Aussie producers are exposing themselves to the potential risk of being completely, if not partially locked out by the Chinese if they were to sign up with Vale, giving all their long term contracts to the Brazilian.
Granted, Vale could not provide all the IO need of the Chinese, but, it will surely make a big dent in the big Aussie if the Chinese were to allot bulk of the Aussie shares to the Brazilian - not sure if this scenario has been considered by this market expert?
In any case, time will tell. I will surely come back to this once the dust is settled. I like to see if these market experts are actually that prescient in their market view - gotta say I am not impressed at this point.
** this write up is worth a keep because frankly I would like to come back to revisit the views of these market experts say 6 months down the road where the coast is clear or when the "fog of war" is dispersed.
This is the current "mainstream" thinking in Australia which I got to say is edging near a point where if this were to turn out wrong, Australia and its mining giants will be in for some butt kicking.
1) I am no sure if this is done on purpose or not, there is an over-emphasis on EC's approval on the Rio/BHP merger but completely ignoring the Chinese threat of applying their anti-monopoly legislation, thereby setting up a potential for show down with China should the plan go ahead.
Based on the many comments from those who really know how the Chinese work, that the arrest of Stern Hu is a warning to Rio and Australia, indicating how serious and how China will play their hand if their security for commodity is threatened, I don't think I would like to take their actions all these while as just plain empty threat.
How much clearer do the Chinese have to make their point clear?
2) There is some kind of spin being sent out on the Chinese spot market for IO here. So far, only half of the IO sent to China has been sold with the remainder still sitting in the warehouse with no official auction. If there is still Chinese steel mill buying from the market, there is a good chance that they are buying from the Indian and not from the Aussie because of their fear of being linked to the Spygate affair. Can't see how this could be construed as all positive.
3) Even assuming the spot market pricing were to become a fixture instead of contract negotiation, the assumption is still full of flaw because it has not taken into account of what the Chinese are attempting to do at the moment. They are clearing house big time and they are taking a complete audit through the IO market, from the custom dept to all the big steel mills in China through CISA.
The Chinese are so determined to get to the bottom of the whole market and its related manipulation that it is in my view grossly dangerous by assuming business will be as usual in the next IO negotiation and if it were to be deadlocked the spot market will turn up being more advantageous to the big producers. There's no certainty in this claim as far as I can see. Why would it?
The usual readily available market information like production numbers, insider information etc would be hard to come by after the house cleaning; and I doubt if there will be others willing to provide the information to the producers now that they know CISA is watching them closely.
It is really quite foolhardy, if not arrogant to assume it's business as usual, and the big Aussie producers will be better off with a new pricing system.
In my view, the initiative after the Stern Hu incident will go to the Chinese, it's they will be calling the shot, and not the big IO producers. To push on a tough stand, the Aussie producers are exposing themselves to the potential risk of being completely, if not partially locked out by the Chinese if they were to sign up with Vale, giving all their long term contracts to the Brazilian.
Granted, Vale could not provide all the IO need of the Chinese, but, it will surely make a big dent in the big Aussie if the Chinese were to allot bulk of the Aussie shares to the Brazilian - not sure if this scenario has been considered by this market expert?
In any case, time will tell. I will surely come back to this once the dust is settled. I like to see if these market experts are actually that prescient in their market view - gotta say I am not impressed at this point.
I have been trading Bhp and RIO and CBA, FMG and other shares since October
I am currently out of BHP
I have been buying and selling continually I am in, in a heavy way. So it is more than an interest to me.
As I have mentioned I don't fully understand charts as yet, however I have been successful with what I have been doing to date.
In my previous posts under Rio I have outlined a few times what I do and how I do it, its no secret.
What I do has made some peoples hair stand on end and I have been critised a fair bit.
As I have said I am learning at times its easy to read the market
However at this current time with reporting season on it is a little harder as the markets are very jumpy. Go back and read what I do I have explained it.
I thought it may have interest people to see how I do what I do that's all. I don't mean to offend anyone.
1) there is talk of using quota to control the rampant imports of IO into China, this is in direct response to the latest development in the Chinese attempt to "house cleaning", primarily in reaction to Rio/BHP's recent tactic of sending IO to China without a "firm" order; this move will make the current "BS" or "spin" or "fog" being sent out by all the producers id as is - how much is ordered and how much of it has been fulfilled;
2) there is talk of imposing escalating warehouse charges in various Chinese port to control the the amount of IO being imported into China; this will have a direct impact on Aussie IO currently "parking" in various Chinese ports;
3) there is talk of copying the Japanese "model" of IO trade management but the Chinese are well aware of their internal problem and the weak and diverse nature of the steel industries; they acknowledge there is an ingrained weakness due to the many "hidden" and unspoken rules and they have placed that to be one of their priorities in the house cleaning exercise;
4) they are aware the European IO is making a headway to the Chinese market although currently the quantum is still insignificant comparing with the big three;
5) they are aware they have lost the initiative at this point to the producers and they will need to import at least 50% of the IO, the question is more on price management and the pricing model as well as from which producer - with the view that the price is fair for long term supply and growth to the Chinese steel industry;
6) they are aware the current spot market price can be easily manipulated and it does not reflect the true demand from the Chinese steel industry; the two pricing models of spot market pricing and the long term contractual pricing is creating an undesirable impact on the small to medium steel mills; they are also looking at the BHP proposed model but believe it will not work out to their advantage due to the "mess" within their steel sector, primarily a lack of a single voice from a central body to represent the industry - this will be their first priority;
7) more, but based on what is reported, it seems the producers are still in upper hand but a lot will depend on how well the current house cleaning by CISA will result in exerting a real control on the various vested interests within the Chinese steel sector; the point worth considering from the Australian angle is this - there is a need to balance out the cost/benefit of profit maximising for the short term vs the good will and long term sales from the Chinese. The Chinese are fully aware that its' the volume sales that matter most to all three producers (as in all commodities) - this is where they believe their bargaining power lies.
Right now, they are in eager discussion with Vale, although not confirmed by Vale, it seems the possibility of a deal is looking good - translated, wait and see. Well, let's hope they don't succeed, because if they do, it's bad news for Australia...
2) there is talk of imposing escalating warehouse charges in various Chinese port to control the the amount of IO being imported into China; this will have a direct impact on Aussie IO currently "parking" in various Chinese ports;
3) there is talk of copying the Japanese "model" of IO trade management but the Chinese are well aware of their internal problem and the weak and diverse nature of the steel industries; they acknowledge there is an ingrained weakness due to the many "hidden" and unspoken rules and they have placed that to be one of their priorities in the house cleaning exercise;
4) they are aware the European IO is making a headway to the Chinese market although currently the quantum is still insignificant comparing with the big three;
5) they are aware they have lost the initiative at this point to the producers and they will need to import at least 50% of the IO, the question is more on price management and the pricing model as well as from which producer - with the view that the price is fair for long term supply and growth to the Chinese steel industry;
6) they are aware the current spot market price can be easily manipulated and it does not reflect the true demand from the Chinese steel industry; the two pricing models of spot market pricing and the long term contractual pricing is creating an undesirable impact on the small to medium steel mills; they are also looking at the BHP proposed model but believe it will not work out to their advantage due to the "mess" within their steel sector, primarily a lack of a single voice from a central body to represent the industry - this will be their first priority;
7) more, but based on what is reported, it seems the producers are still in upper hand but a lot will depend on how well the current house cleaning by CISA will result in exerting a real control on the various vested interests within the Chinese steel sector; the point worth considering from the Australian angle is this - there is a need to balance out the cost/benefit of profit maximising for the short term vs the good will and long term sales from the Chinese. The Chinese are fully aware that its' the volume sales that matter most to all three producers (as in all commodities) - this is where they believe their bargaining power lies.
Right now, they are in eager discussion with Vale, although not confirmed by Vale, it seems the possibility of a deal is looking good - translated, wait and see. Well, let's hope they don't succeed, because if they do, it's bad news for Australia...
Brokers Remain Divided On BHP Value
** it seems none of the analysts has factored the "Chinese risk" BHP is exposing itself to with the recent merger proposition. They are potentially ignoring some or all of the ground work the Chinese are currently building in preparation for future price negotiation, starting with IO. There is every chance that this will spread to other commodities like copper, zinc, coal and nickel... let's wait and see.
** it seems none of the analysts has factored the "Chinese risk" BHP is exposing itself to with the recent merger proposition. They are potentially ignoring some or all of the ground work the Chinese are currently building in preparation for future price negotiation, starting with IO. There is every chance that this will spread to other commodities like copper, zinc, coal and nickel... let's wait and see.
Hu - persona non grata?
** not after he has been found guilty and probably locked up not less than 2 years, this my bet. In any case the emphasis for the Chinese is to clean up their IO market to make sure they are not at the receiving end of continuous price rises. This has been made quite clear by this news report.
They may not be able to turn the table this year, but just give them more time, I am sure the table will turn against the producers. As far as I am concerned, commodities are "valuable" only if there is demand. Without a market most commodities don't worth the dirt they are sitting on. And the Chinese know this, so are the producers - it's darn silly for Rio/BHP to try cornering the IO market through their merger. If China were to be a smaller market, they could have got away with the move; but with the Chinese market providing 50% of the demand of their products, and not just IO but others like coal and copper which are part of the bread and butter earners for these two, they must be quite mad to try screwing with their biggest customer.
At best, they could lead in the short term but longer term I am quite sure they will be the ones paying the ultimate price, in the process taking all of Australians down with them. They should always remember that China has a centralised authority and they are not dealing with individual company but a big whole business entity called the China Inc... never pick a fight with someone you cannot win, thought they must have heard of this before?
To those who doubt what I am saying, well, let's wait for it. Time will tell... already at this point I am quite sure Rio and BHP are feeling the heat with the sudden plunge in their spot market sales. The latest news from China, and quoting one of the top 10 steel mill purchasing GM, in the whole of July, he has not bought a single tonne of ore from Rio, and he is quite sure that his colleagues are doing the same...
Those that are buying and are maintaining the spot price are probably the really desperate small to medium mills, but, for Rio and BHP, their focus is on volume sales, which, for as long as they are maintaining this attitude of wanting to corner the big Chinese steel mills demanding both high price and volume sales - they are dreaming.
It will not happen. Or if it were to happen this time, it will become much harder the next time and so on until the playing field is reversed, to the advantage of the Chinese, which by then, their knife will be out and they would demand every pound of flesh from Rio/BHP to even the score.
The only way forward for all the parties is to come to a compromise where they should seek to strike a balance between supply and demand, and they should aim for a more equitable trade proposition between both sides.
Aiming for a 40% price increase year after year consecutively would serve to kill the goose that lays the golden egg. It's totally counter productive for all the parties involved. To make it worse, this goose is not a real goose, it's an elephant!
... now instead of golden egg, they are gonna get some seriously big pile of dung from an angry elephant.
** not after he has been found guilty and probably locked up not less than 2 years, this my bet. In any case the emphasis for the Chinese is to clean up their IO market to make sure they are not at the receiving end of continuous price rises. This has been made quite clear by this news report.
They may not be able to turn the table this year, but just give them more time, I am sure the table will turn against the producers. As far as I am concerned, commodities are "valuable" only if there is demand. Without a market most commodities don't worth the dirt they are sitting on. And the Chinese know this, so are the producers - it's darn silly for Rio/BHP to try cornering the IO market through their merger. If China were to be a smaller market, they could have got away with the move; but with the Chinese market providing 50% of the demand of their products, and not just IO but others like coal and copper which are part of the bread and butter earners for these two, they must be quite mad to try screwing with their biggest customer.
At best, they could lead in the short term but longer term I am quite sure they will be the ones paying the ultimate price, in the process taking all of Australians down with them. They should always remember that China has a centralised authority and they are not dealing with individual company but a big whole business entity called the China Inc... never pick a fight with someone you cannot win, thought they must have heard of this before?
To those who doubt what I am saying, well, let's wait for it. Time will tell... already at this point I am quite sure Rio and BHP are feeling the heat with the sudden plunge in their spot market sales. The latest news from China, and quoting one of the top 10 steel mill purchasing GM, in the whole of July, he has not bought a single tonne of ore from Rio, and he is quite sure that his colleagues are doing the same...
Those that are buying and are maintaining the spot price are probably the really desperate small to medium mills, but, for Rio and BHP, their focus is on volume sales, which, for as long as they are maintaining this attitude of wanting to corner the big Chinese steel mills demanding both high price and volume sales - they are dreaming.
It will not happen. Or if it were to happen this time, it will become much harder the next time and so on until the playing field is reversed, to the advantage of the Chinese, which by then, their knife will be out and they would demand every pound of flesh from Rio/BHP to even the score.
The only way forward for all the parties is to come to a compromise where they should seek to strike a balance between supply and demand, and they should aim for a more equitable trade proposition between both sides.
Aiming for a 40% price increase year after year consecutively would serve to kill the goose that lays the golden egg. It's totally counter productive for all the parties involved. To make it worse, this goose is not a real goose, it's an elephant!
... now instead of golden egg, they are gonna get some seriously big pile of dung from an angry elephant.
Brazil!
** the full title of the news: "Brazil benefits from Hu detention" - how misleading. Hu is just an incidental victim in this game of IO chess. No matter how the media is going to window dress the issue, there is no escaping the reality behind the title - it's the Aussie miners that are being targeted in the Chinese retaliation.
And this just the beginning! (As anticipated in my blog umpteen times! Sad!)
Next, the question, as usual: what's pushing the investors' rush to gobble up these two's shares? I mean both Rio/BHP? It's almost a guarantee that their next quarterly or half yearly report will be under water!
... and until the conflict with China is resolved, there's no guarantee that they will sign up with the Aussie producers in the next round.
So how? Investing by hope and prayers and then expecting a winning outcome?
Good luck.
** the full title of the news: "Brazil benefits from Hu detention" - how misleading. Hu is just an incidental victim in this game of IO chess. No matter how the media is going to window dress the issue, there is no escaping the reality behind the title - it's the Aussie miners that are being targeted in the Chinese retaliation.
And this just the beginning! (As anticipated in my blog umpteen times! Sad!)
Next, the question, as usual: what's pushing the investors' rush to gobble up these two's shares? I mean both Rio/BHP? It's almost a guarantee that their next quarterly or half yearly report will be under water!
... and until the conflict with China is resolved, there's no guarantee that they will sign up with the Aussie producers in the next round.
So how? Investing by hope and prayers and then expecting a winning outcome?
Good luck.
Stern words for Rio's mess in China
** sure am glad to read this piece - it's all about the big picture and future prosperity for the young...
** sure am glad to read this piece - it's all about the big picture and future prosperity for the young...
Read the whole news article here...
*** since I have a bias against the two big iron ore suppliers and am betting their price will go down, I am not taking this as a good news because thus far, BHP is saying they have only managed to sell 23% of their ore in long term contracts with another 30% yet to be sold through the spot market and/or the index based system.
...but I could be wrong here since I am completely loss on this line - "The mining giant said negotiations for about 47 per cent of its iron ore volumes are ongoing." - I don't know what it means. Or my guess here is this 47% of the iron ore has no taker thus far and BHP will have to try its luck next time.
If my guess is right then this year's BHP has managed to sell about 53% of its IO at various prices with 47% yet to get any offer. It will be a lean IO year for BHP I think...
Also, regarding the spot market in China, the supply-demand situation may change drastically now that the market knows BHP (and probably Rio) has so much unsold IO, it now has become a buyer's market.
... but we will see, there's no point jumping to any early conclusion.
*** since I have a bias against the two big iron ore suppliers and am betting their price will go down, I am not taking this as a good news because thus far, BHP is saying they have only managed to sell 23% of their ore in long term contracts with another 30% yet to be sold through the spot market and/or the index based system.
...but I could be wrong here since I am completely loss on this line - "The mining giant said negotiations for about 47 per cent of its iron ore volumes are ongoing." - I don't know what it means. Or my guess here is this 47% of the iron ore has no taker thus far and BHP will have to try its luck next time.
If my guess is right then this year's BHP has managed to sell about 53% of its IO at various prices with 47% yet to get any offer. It will be a lean IO year for BHP I think...
Also, regarding the spot market in China, the supply-demand situation may change drastically now that the market knows BHP (and probably Rio) has so much unsold IO, it now has become a buyer's market.
... but we will see, there's no point jumping to any early conclusion.
Chinese firms buckle in iron ore price war...
** we will see if he is right...
The news from China seems to be inching towards the abolishment of the spot market, which basically serves the small steel mills that are unable to get their ores from either the producers or from the bigger steel mills. Also because of the price gouging by the license distributors, quite a few of their license will be withdrawn - if these suggestions were to be implemented, it would mean BHP's preferred method will become a quarterly or half yearly negotiation affair - without the spot market's "misleading" price level since according to the Chinese the spot market price is heavily manipulated by the producers.
Without the spot price as a form of price indication, BHP will be negotiating with China on purely supply-demand forces and most likely "doing it hard" because the Chinese are expecting a 20% pull back in demand in H2 and they are saying the last 6 months' IO imports did not reflect the actual market demand...
So, let's see if Mr Wendt is right or just spinning for BHP...
** we will see if he is right...
The news from China seems to be inching towards the abolishment of the spot market, which basically serves the small steel mills that are unable to get their ores from either the producers or from the bigger steel mills. Also because of the price gouging by the license distributors, quite a few of their license will be withdrawn - if these suggestions were to be implemented, it would mean BHP's preferred method will become a quarterly or half yearly negotiation affair - without the spot market's "misleading" price level since according to the Chinese the spot market price is heavily manipulated by the producers.
Without the spot price as a form of price indication, BHP will be negotiating with China on purely supply-demand forces and most likely "doing it hard" because the Chinese are expecting a 20% pull back in demand in H2 and they are saying the last 6 months' IO imports did not reflect the actual market demand...
So, let's see if Mr Wendt is right or just spinning for BHP...
Iron spot price up as Asia returns
** at spot price of US$100, both Rio/BHP should be rejoicing, but let's see if they are really rejoicing... I like to see that in the H2 report.
Whilst the spot price is at a high, Vale has been singing a slightly different tune...
In fact Vale has been making waves on the Chinese TV with star such as Rinaldo "assuring" the Chinese people that Vale is there for the long term and they are not into profit maximising with their IO sales but as a friend to the Chinese and growth together in their march towards greater prosperity...
They even pointed out they have spent US$1.9b buying ship from China just so they can ship and sell their IO cheaper to the Chinese. To make it easier for the Chinese steel mill, Vale will subsidise 20% of the shipping cost, etc....
Grand gesture and right under the Rio/BHP's nose they are stealing the market share away from them. Yes, Brazil is stealing the IO market shares from the Aussie!
I don't know what kind of agreement they will sign with the Chinese but if it is some kind of long term sales contract that locked in the Chinese for a long time... well, well... *&^%$#@!
** at spot price of US$100, both Rio/BHP should be rejoicing, but let's see if they are really rejoicing... I like to see that in the H2 report.
Whilst the spot price is at a high, Vale has been singing a slightly different tune...
In fact Vale has been making waves on the Chinese TV with star such as Rinaldo "assuring" the Chinese people that Vale is there for the long term and they are not into profit maximising with their IO sales but as a friend to the Chinese and growth together in their march towards greater prosperity...
They even pointed out they have spent US$1.9b buying ship from China just so they can ship and sell their IO cheaper to the Chinese. To make it easier for the Chinese steel mill, Vale will subsidise 20% of the shipping cost, etc....
Grand gesture and right under the Rio/BHP's nose they are stealing the market share away from them. Yes, Brazil is stealing the IO market shares from the Aussie!
I don't know what kind of agreement they will sign with the Chinese but if it is some kind of long term sales contract that locked in the Chinese for a long time... well, well... *&^%$#@!
The local analysts' view... click me.
** if I am one of these local analysts I would pay more attention to Vale, that's where it matters... thus far, the spins from the local media have been clouding out the "real" issue which concerns the bread and butter of everyone. In almost every news report, I'd noticed the journo would never failed to put a positive spin on what they are reporting. Being patriotic (misguidedly, gotta say) or parochially loyal is one thing, but being objective and truthful and professional in carrying out their duty is another - somehow some seem to have lost their disciplines and have become the mouthpiece of the big enterprises... is this the standard of Aussie journalism?
Worse still, it is quite clear that some local investors are lapping up all these "good news" without really questioning what is being fed to them...
...anyway, do I care?
** if I am one of these local analysts I would pay more attention to Vale, that's where it matters... thus far, the spins from the local media have been clouding out the "real" issue which concerns the bread and butter of everyone. In almost every news report, I'd noticed the journo would never failed to put a positive spin on what they are reporting. Being patriotic (misguidedly, gotta say) or parochially loyal is one thing, but being objective and truthful and professional in carrying out their duty is another - somehow some seem to have lost their disciplines and have become the mouthpiece of the big enterprises... is this the standard of Aussie journalism?
Worse still, it is quite clear that some local investors are lapping up all these "good news" without really questioning what is being fed to them...
...anyway, do I care?
Chinese says...
** guessing now...
1) expect a cull of the 152 importers;
2) a possibility of abolishing the spot market, once they found a solution to provide for the small steel millers, and the solution could be provided by Vale, as hinted by Vale' s commercial.
** guessing now...
1) expect a cull of the 152 importers;
2) a possibility of abolishing the spot market, once they found a solution to provide for the small steel millers, and the solution could be provided by Vale, as hinted by Vale' s commercial.
