I am not surprised at the IO price action. It was reported few times already that the IO traders have to pay back their loan by June each year. Given that the deposit for the IO traders increased also they all need to lighten up and some need to liquidate loosing a lot.
On the other hand it was reported that big steel mills who have consigned deliveries form the big miners such as FMG who receive large discount than the spot price by up to double the 7% they were getting before. Imagine steel mills receiving 15% discount on the deliveries from FMG (quoted a few times in the news) and on selling it on spot as they arrive in ports, at a smaller discount to spot, ever driving the IO down and making profit out of it only to buy more from FMG to do the same again. This is happening as they were reports in the media that steel mills are selling on market.
The discount they receive is enough for them to make good money, and the price goes down and down again and again. This will not stop until there is a shortage in the market which does not look likely.
I am sorry to get caught with shares in this but hope that sanity will eventually prevail and miners stop the practice. The majors actually enjoy this as this will bankrupt the small miners while they will still go on and will put any new potential development off for many years. With the extra labor available in a slack market they can reduce their costs and become more profitable even in a low IO price environment.
The likes of AGO, BCI etc would have already been absorbed ad bargain prices when this all unravels.
DYOR
ARI Price at posting:
90.5¢ Sentiment: None Disclosure: Held
