Chinese Steel Mills To Default On Quarterly Iron Ore Contracts

From Metal Bulletin: Quarterly, spot or swap — which iron ore contract to choose?

Tom Albanese’s admission that Rio Tinto may abandon quarterly iron ore pricing, should the majority of steel mills default to the spot market, could benefit the emerging market for over-the-counter iron ore swaps.

Macquarie Research believes third quarter contract prices will be higher than spot prices as soon as July. (MB Jun 30)

If this is right, steelmakers will be sorely tempted to abandon quarterly contracts very soon after their inception.

This could be another sign of slowing China steel demand. If one agrees to a quarterly price, and then intentionality defaults one month later, the situation which his faces is certainly not that great.

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This entry was posted on Tuesday, July 6th, 2010 at 12:17 pm and is filed under China, Commodities. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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