Recently I've started paying more attention to other indicators beyond the Dalian. There seems to be very big price differences between what the Dalian suggests will be the future price of iron ore and what other indicators like the SGX FEF 62% index suggests will be the future price sometimes.
Yesterday as the Dalian was going up the SGX FEF was going down. From what I understand they should be measuring pretty much the same thing. And if that is so there should be a brokering opportunity for someone in exploiting any difference.
I could be wrong about this, but I think the view that the Dalian iron ore price drags the spot price up, ie, causes buyers to be willing to pay more at spot purchases because of a perceived shortage, sometimes is true, and has been expressed by Nevil and Twiggy.
Another thing I am not clear about rc is, the exact structure of FMGs payment process. In the RIO report, RIO describes a number of different ways, different payment terms, it has for selling its ore. Sometimes the price is the average of the last quarter's spot price, sometimes its an average of the last month's, sometimes it is just spot. When the price moves as much as quickly as it has in the last quarter - those differences in payment terms could be quite significant. FMG doesn't do that much.
I understand a lot of what FMG sells is on relatively long term contract. Just as RIO recently signed up one of its customer/investors for a long term contract. But the exact proportions aren't public domain.
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