While we don't know the grade, we do know its not 28% or 29%. The 26 May 2021 announcement noted:
With the revenue reported, its clear that E25 have been absolutely killed on the shipping this quarter, potentially collecting the double-wammy of:
The adjustment process to move from CIF to FoB Port Hedland creating a very severe negative shipping price adjustment (as indicated by the baltic Dry index in the quarterly); and
Missing the higher prices from the markets responding to high shipping costs with higher CIF prices. The OM Holding update Sep Quarterly had the price for Q3 being up only slightly to US$5.22/dmtu CIF China when Asian Metals was having quite a large change during the quarter.
These conditions won't continue forever.
A price adjustment for higher shipping is happeningThere would appear to be some solid price increases in the pipeline. The 2nd ship departed 1 September. We are now 58 days after this. The 60day price changes is one interpretation of how the market has changed in the last two months. The six variants below of 44-45% ore are up 7.2% to 11.8% over the last 60 days.
I'd been assuming the contract payment would be based on either contract mid-points or the seller advising the ore grading with a wash-up payment/deduction if it differed from this. As a new supplier E25 is however in a weak and unproven negotiating position. Is it possible they signed a contract reflecting this weak negotiation position which had initial payments based on what would be the minimum payable under the contract (ie 28% plus an undesirable impurities mix). If this was the case, the "substantial smelter credits" could be well into the millions as the ore pricing flips from minimum acceptable to reflecting delivery of good ore. An upgrade from 28% to 33.7% is +20% and could approach +30% if shipping costs have already been fully adjusted for. Good Silicon levels could add to this, and a lot more of the gap to simple default calculations is timing.
If they have however signed this sort of contract, they have done a very poor job of explaining this in their announcements to date.
E25 Price at posting:
$1.69 Sentiment: Buy Disclosure: Held
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