Pellet Price, page-873

I have a sneaking suspicion that the main consequence of the Vale disaster won't necessarily be the IO price in the long run. China, as the largest producer of steel, does not want to pay too much for its IO - so prices will settle to some extent. That will always be the case anyway. The real effect may be in the board rooms of steel makers - and in Chinas case, that means at a government level.

Supply stability has always been a concern but maybe that will be reinforced now and traditional sources of supply will no longer be taken as granted to the extent it has been in the past. After two big mining disasters in Brazil, the government there is under some public pressure to ensure the safety of mining activities so we may see a slower recovery in IO production in Brazil - and big steel producers would be taking that into account.

Larger Australian miners will get an advantage of course - in the short term at least - but smaller operations (such as GRR) will also come into play. GRR needs to expand its production and its reliance on a single source of supply with a limited lifespan (2034). At the current level of production, it simply can't take full advantage of situations like the one that is currently being played out.

I am hoping that GRR sees that and works much harder to partner up the Southdown project with the view of fast tracking that project to fruition and I think it may be in a better position now to find a partner. Given the Chinese connection in GRR, it could well be that China may be the location of such a partner - or perhaps the 30% Japanese involvement in Southdown may make Japan think about it as well.

In any case, the rise in the IO price may not be the only silver lining for GRR and it could be the event that pushes GRR forward longer term.