China Securities Journal, citing a procurement manager at an unidentified steel mill in southern China, reported that mining giant BHP Billiton Ltd has begun auctions for spot iron ore shipments to Chinese steel mills marking the latest shift in its pricing strategy to cash in on rocketing prices.
The report said that BHP has started to auction 170,000 tonne spot iron ore shipment every fortnight to Chinese customers.
If true, it clearly indicates gigantic shift from annul bench mark price to quarterly index based price to monthly finally down to spot, reflecting that at the end of the day market forces prevail.
Iron ore spot market is continuing its upward momentum with approaching spring festival holidays and concerns on supply side. Reports are filtering in for transactions at USD 184 CFR levels on limited high grade parcels from India as well as concerns of a tropical cyclone threatening to interrupt production and shipments in Australia. As the higher grade cargos are very few, talks of up to USD 190 per tonne CFR are starting to be heard.
With the gradual shift form benchmark pricing based long term contracts to spot cargos, it has become more vital for both sellers as well as buyers to precisely monitor the daily movements of iron ore spot prices to keep tab on trends and spot opportunities.
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