From The Age:
Former Rio Tinto executive Mal Randall said the iron ore spot pricing model has “been a disaster” and the major producers should consider returning to long-term benchmark contracts.
…”Iron ore pricing now is, to a large extent, in the hands of the traders who can wheel and deal,” Mr Randall, who founded the Kerry Stokes-controlled Iron Ore Holdings before it was taken over by BC Iron, said.
“Sometimes it bears no relation to the actual iron ore price, it’s just deals and deals within deals. If they want to push the price up or down somewhere out of Qingdao they will and they’ll do it on one or two ships.
Mr Randall also criticised the major miners’ expansion plans, arguing they are damaging the industry and need to have their practices reviewed by the Australian Competition and Consumer Commission.
The shift away from contracts was short-term thinking. Having said that, it was probably inevitable given hanging hundreds of billions of dollars on face-to-face negotiations was always going to end in disaster.
In moving to spot market pricing, the cycle has become more volatile, but on the upside as well as down. It’s a bit rich for iron ore juniors to complain now given it was the great spike that breathed life into many, albeit temporarily.
As for the ACCC, what would they find if they looked at the market now? A Pilbara duopoly competing hard with a number of new large market entrants across three continents. What are they going to do? Insist on the locals acting like OPEC?
There’s no conspiracy here. The iron ore juniors were a figment of the super-cycle. It is gone and now so are they.
