I too have followed the IO market since 2008 and , IMO, there has been more
price volatility since we went from 12 month forward contracts to 3 nonths. Since then,
again IMO, the Chinese have been seriously manipulating price by stockpiling and
laying off buying on the spot market at key times which, in turn, down ramps the
following 3 month forward prices.
Personally I have had very limited success in investing in ASX companies with a substantial
Chinese presence on the board and having complex and often related Chinese finance and
Chinese off-take deals. In my view one has to keep a very close eye on such boards to ensure that
they are working for retail Aussie shareholders.
We'll simply have to wait and see. Again, IMO, AXZ will have a few CRs before it hits its straps;
enough to keep the SP down, derisk and make a bargain buy for the Chinese later.
This project is outside Australia and, as such, is not subject to FIRB supervision.
We are a bit slack in not getting together with Brazil and restricting production (putting upward
pressure on price) like what OPEC does with oil. If the WTO accepts OPEC's production ceilings
then surely it would have to accept a similar Iron Ore cartel deal.
At present the Chinese Government orchestrates Chinese mill buyers while it plays
the big suppliers against one another such as Rio, BHP, Vale & FMG. Not bad, eh, if we allow
it to happen. IMO, if BHP, Rio , FMG and our trade minister got together with the Brazilian
Government and Vale, they could hammer out a deal which would ensure a FE62 IO price
of $120/ton USD on an ongoing basis simply by fine tuning supply; particularly spot
market supply.
