And another risk/issue.Macquarie posted today in their...

And another risk/issue.

Macquarie posted today in their commodities report that

"Steel Business Briefing has reported that Vale has agreed to iron ore pellet premiums with Chinese steel mills at $20/t for 1Q12. This marks a significant reduction from the $42/t prevailing over recent quarters.

In our view, this would be at a level which is below the marginal cost of pelletising at many producers and again reflects the greater weakness in the market for premium iron ore products as steel output levels fall and productivity is less of an issue at this time."

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In other words, when the steel mills are running flat out to produce, they will pay top dollar for premium ore (ie., GBG's). When times are slack, they don't need to.

Therefore, when times are good, they are bloody good, when times are bad, they are bloody bad! Just exaggerates the price swings.