Chinese steel makers (fuelled by the hundreds of smaller steel mills) have greatly exceeded the China Sea Borne Trade expectations by setting a record import of 52.8 million metric tons of iron ore in March.
It is not entirely surprising given that the smaller mills with less overhead expense can produce a number of lower end steel products as opposed to the larger mills specializing in high end steel products, (i.e., the auto and petroleum industries, which demands are still down world-wide) and with larger overheads.
The 2009 annual fixed contract prices have not yet been agreed upon between China's major steel mills and the Big 3 producers; however, Cotton & Western has concentrated its efforts in financing the Baja iron ore project through negotiations with smaller steel mills that have a need for a steady supply of quality iron ore. The company has reached an agreement for a base price of $45.00 per dry metric ton, FOB, Ensenada, Baja California, Mexico, less a per ton discount for financing the project together with exclusive rights to the iron ore production from Baja Nos. 4 and 14.
C&W's 2009 fixed price represents approximately a 40 to 45% reduction on the 2008 prices, FOB Mexico.
Source: Market Watch (press release)
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