Statistics of Umetal.com show that ocean freight from Brazil to China has surged by 154.7% since 2009, and that from Australia to China by 53.7%. The sharp increases in freight have undoubtedly raised up the CIF price of China's imported ore. At present, the price gaps between Indian ore and Australian ore, Brazilian ore have been shorted to 11-16%., which will greatly increase China's pressure of the iron ore talk.
The previous iron talk in 2008 had left China with a profound lesson. In the year China imported iron ore of 443.6 million tonnes with cost rising USD 21.38 billion compared with 2007, and this amount was equivalent to CNY 146 billion. In 2008, the average import price of iron ore remained at USD 136.2 per tonne increasing by USD 48.2 per tonne compared with USD 88 per tonne in 2007. Among the cost increase in 2008, that from Australia, Brazil and India accounted for 83%, or USD 17.7 billion.
In the beginning of 2009, the ocean freight from Brazil to China remained at USD 9.104 per tonne, and in February 6th, it surged to USD 23.188 per tonne, by 154.7%. The freight from west Australia to China stayed at USD 5.655 per tonne earlier this year, while it went up to USD 8.691 per tonne on February 6th by 53.7%.
At present, 63.5% Indian ore is offered at USD 86 per tonne, while the long term contract price of Australian ore stays at $95 per tonne. As the three major mines' iron ore sold to China has all be discounted in accordance to long term contract price, the iron ore for 2009 is facing much pressure. With the diminishing gap between spot ore price and long term contract price, it wound be extremely difficult for China to get a 40% to 50% cut in iron ore price.
Source : China Securities Journal