China has engineered the drop in IO price by:
(a) Changing annual contracts to 3 month contracts based on spot price
(b) controlling the spot price via Chinese stockpiling
(d) curtailing small producer contracts compelling them to sell on the spot market
(d) Chinese over investment in IO mine and infrastructure development to
ensure oversupply.
The logical solution for both Australia and Brazil is to curtail production.
This can be readily done by setting the current royalty rate at the 2013
level of production and adding at least 50% extra royalties on any ore
produced above this benchmark. The removal of the MRRT has allowed
BHP, RIO & FMG to pump out as much IO as they can while cutting back
on production costs which has swamped the price and deprived Mr Hockey
of much needed tax revenue not to mention the demolition of our balance of trade.
MM
MGX Price at posting:
19.5¢ Sentiment: None Disclosure: Not Held
