Hong Kong: Capesize owners should be braced for a potential trade spat that could ruin their tonne/mile scenario if news just in from Steel Business Briefing becomes confirmed. The leading commodity news bureau reports that 'Brazil's Vale has issued Chinese steel customers with a contract addendum, raising the 2008 benchmark iron ore prices it originally negotiated in February by around 20%'.
The price of Vale's South System iron ore fines has now increased 86.4% on the 2007 contract price, while the price of Carajás fines is up 92.4%. This compares to increases of 71% and 65% respectively that Vale agreed with Chinese mills back in February.
"As per our phone call, please be informed that based on the agreement reached with other customers, the new reference price to the shipments of Vale Sinter Feeds shall be applied to [name of customer] as from September 1st 2008 as follows: 1) Carajás Sinter Feed = $1.4060/dmtu, 2) Southern System Sinter Feed = $1.3441/dmtu," Vale said in an email to customers on 3 September, obtained by SBB.
Vale is hitting back, irritated that it plunged in early this year while the Australians held out for months and eventually bagged an 85% price increase.
The rise and rise of Brazil as a source of China's iron ore has stretched the bulker fleet dramatically helping rates spiral. This late price addition though may put the brakes on the trade. Analysts speculate that Vale is merely positioning itself for aggressive 2009 price negotiations. Talks between the two parties over next year's contract are set to start two months from now. [3/9/08]
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