by: Rohan C. Pease
March 05, 2010 | about:
BHP / FCX / FSUMF.PK / MMXMY.PK / RTP / VALE
A slew of reports and articles came out today in support of rising prices for steelmaking ingredients, including coking coal, iron ore and Moly. These indicators are bullish for commodity prices[emphasis added...jt].
I closely follow iron ore news, and today Companhia Vale (VALE) put a huge dent in the benchmark pricing structure by striking a deal with domestic steelmakers to increase the benchmark contract by 80%. The move signifies to China that it should be able to cover the same increase as their domestic mills. China will be hesitant to agree to such a high number, even though an 80% increase is still considerably lower than current spot rates. The move puts Vale and BHP Billiton (BHP) on the same page and may lead to a more flexible pricing system for iron ore, shattering the benchmark pricing system in place for four decades. It's about time: Iron ore is the world's second-largest commodity market behind crude oil. Until last year, it was a market without futures/swaps contracts - what a momentous shift!
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$^)