The major iron ore miners work on 3 month set contract prices...

The major iron ore miners work on 3 month set contract prices and variations in the spot price only effects the forward
3 month contract price.

IMO, there is a battle between China and the miners to manipulate the spot price. Spot volumes only represent about
20% of seabourne IO and China has the upper hand by stockpiling from contract supplies and down-ramping spot
prices to lower forward contract prices. This yo-yoing of spot price is presented by the media as if it were the entire price recieved by the miners.

The art of good marketing is to decide on what volume of one's production is allocated to the spot market (if any)
so that the overall revenue can be optimised. On the other hand, the Chinese will want the opposite and it would seem
that the Chinese are winning this cat and mouse game.

This year to date IO volumes to China have lifted 16% yet the price YOY has dropped. Keep in mind, also that spot
prices are in USD and with our AUD being about 94c American, our price per ton is a lot higher than if our AUD were to be $1.10 USD.

EG: Say if the contract FOB price is $100/tn USD, FE62 and the current exchange rate is 94c US then that is about
$106 AUD/ton.

Conversely, if the contract price is $100/tn USD and the exchange rate is $1.10 US to the Aussie , then this pans out
at about $91 AUD/Ton. These extreme exchange rates make a difference of $15 AUD/ton.

Whle the SP of BHP, RIO, FMG etc seem to vary directly with short term movements in the IO spot price, other considerations
such as current contract price, %age sold spot and currency hedging are neglected.

The bottom line is that China is going to consume progressively more iron ore in the foreseeable future and suppliers
at this stage do not have the unity of OPEC to control volume and, consequently price. In fact Vale is threatening
to withdraw from a world miners conference the meets twice a year due to impending litigation with RIO over a Jewish
investors rights in an African IO tenement. So much for unity!

On the other hand the Chinese users are centrally supervised and co-ordinated by the Chinese Government
( good old Communist System). Remember the RIO executive fiasco 5 years ago?

Cheers
Moorookamick