why the drop on rio, page-5

Comparing the FMG deal with Chinese yearly consumption or IO

"China produces 500m tonnes of steel per annum (a conservative number) so yearly consumption is a minimum 770m tonnes of iron ore" (Thanks Horsetrader)

and

From the age

Fortescue has agreed to supply China with 18 million tonnes of iron ore by December 31 at a 3 per cent discount to the price Rio set with non-Chinese steel makers in May.

Despite Fortescue and the Chinese steel industry heralding the cut-price deal as the Chinese benchmark, Rio is showing no signs of backing down in its efforts to extend its May benchmark settlement to China. Rio said that it did not see the Fortescue agreement as relevant to its pricing ambitions.

The other big Pilbara iron ore exporter, BHP Billiton, did not comment but is also likely to consider the Fortescue settlement irrelevant. Mr Forrest has other ideas, claiming yesterday that Fortescue's deal was a landmark agreement.