July 31,
- Quarterly system can lower volatility, will likely stay
- Analysts see possible move to monthly system
- Vale sees long-term iron prices in $90 to $100 range
The mismatch between the spot price, which recently fell toward $120, and quarterly contracts, which are close to $140 per tonne, could allow speculators to build up stocks when spot prices are low and then buy on quarterly contracts when prices go back up.
Chinese buyers did this in the wake of the 2008 financial crisis with the benchmark system and the spot market, leaving miners selling cheap ore at benchmark prices to clients that often stockpiled it and resold it with a mark-up on the spot market.
The average Iron ore sale price in the second quarter was $91.93 per tonne, above the $64.76 price for the first quarter but still considerably below the price of around $120 that analysts had expected.
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