Subscribe to RSS feedPrice motivates China to turn to India
AT THE height of the freight market boom in early June 2008, Chinese steel mills paid a staggering US$227 per tonne for iron ore from Brazil – US$116 for the iron ore, and nearly US$109 per tonne for the freight.
By early December, freight costs had crashed to US$6.80, making the total cost of Brazil’s iron ore cheaper than Australia’s, even though it was further to ship. Australian producers had negotiated a freight premium with steel mills at their annual price negotiations, charging US$144-US$201 per tonne for iron ore. The high price was to reflect cheaper shipping costs compared to Brazil.
But the delivered spot price of iron ore sold from India is now even cheaper than the FOB price, at around US$63 per tonne, including the freight costs. India is one of the few major producing countries not to participate in the traditional pricing structure that sees steel mills and miners hold increasingly contentious talks each year to set an agreed annual FOB contract price.
For this reason, China is buying more and more ore from India: from 32m tonnes in 2003 to 91m tonnes in 2008, according to Howe Robinson.
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