how high the pellet price 2011?.......$250/ton, page-17

It seems that Grange has already completed the IO pellet pricing index.

"Negotiations on an iron ore index (IODEX) based market pricing mechanism with customers will continue during March"

It's just that the market hasn't been officially told, however if you are a subscriber to www.metalbulletin.com you'd already know.

So here it is.

Grange Resources using iron ore fines index as reference for pellet contracts, md says
11 March 2011


Iron ore pellet producer Grange Resources is using index prices for iron ore fines as a reference for its steel-customer pellet contracts, md Russell Clark told MB.

The miner, which produces around 2.1 million tpy of pellet from its Savage River operation in northwest Tasmania, has two offtake deals in place.

One deal is for 1.3 million tpy with its biggest shareholder Shagang and the other is with Australian steelmaker Bluescope Steel for 800,000 tpy of blast furnace feed pellets.

Since the breakdown of the annual benchmark system, the miner has been receiving $150 per tonne fob from its two customers. This was an interim agreement on the basis that Grange would evaluate market intelligence in order to accurately price material, Clark said.

In this period of time the miner has been able to calculate a more appropriate formula that takes into account freight differentials, iron content as well as Vale?s pellet pricing.

?As a rule of thumb, we add around $50 per tonne premium on top of the 62% Fe cfr China [fines] price to get an fob [pellet] price,? he explained.

The miner now uses the monthly average of one of the 62% Fe indices and adds this premium on a monthly basis, he said.

And Grange is to receive a retrospective payment from its two offtakers now it has devised this method.

?1.3 million tonnes of material will be retrospectively priced,? Clark said.

This will be priced at around $180-210 per tonne fob for the period, he estimated.


So work that out boys and girls, 1.3 million tons x an extra $30 to $60/ton. I'm betting it's about $50/tonne, so thats an extra $65 million extra profit for product already delivered.

From now on it's easy to calculate, just add "$50 per tonne premium on top of the 62% Fe cfr China [fines] price to get an fob [pellet] price,?

Currently the steel index for fines is US$176 down a little from US$178.30 a week or so ago.
So Grange is currently receiving US$226/tonne FOB.

Check out http://www.thesteelindex.com/en/iron-ore/

Those shares we bought last week will look very cheap soon.
Surely if the www.metalbulletin.com knows this information, then it's certain the market will be informed shortly, so if you didn't get your fill on Thursday or Friday, then it may pay to top up first thing tomorrow.