Towie you may remember that a few years ago IO pricing was...

Towie you may remember that a few years ago IO pricing was mainly the result of annual 'negotiations' between BHP/RIO/Vale and China. This arrangement was drawn out and a massive time waste for the majors at a time when the IO price was rising significantly year to year and there was very little visibility on real demand in china (not everything has changed then..) Then in the GFC when the IO fell sharply China started reneging on previously agreed contracts and opting instead to only accept delivery at the lower spot price(SP). This gave the majors - led by Kloppers who has always preferred spot pricing - the chance to push to move most delivery onto SP contracts. FMG could have gone ahead and signed IO future contracts all over the place back in 2011 or early 2012 (remember its only in that time that they've really 'proven up' their successfully ability to ramp up production) but who really would believe the Chinese would honour them when the SP falls precipitously like over the last 2-3 months?

Slightly tangentially, the Chinese certainly are not on 'our' (IO producers; Australia or Western democratic countries in general) side and it behooves this country (and others) and its government to wake up to this fact. The chinese understand and respect an iron fist not a soft FIRB welcome mat.