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The recent events unfold showed the Rio Tinto, BHP and Vale had ignored Supply and Demand equation skewed towards an imbalanced Supply for China request of 40 - 45% price cut. Instead 3 Biggies showed China the Monopolistic Pricing Power to command Market that Seller is KING over BUYER and set high benchmark price cut of 33% for fines and 44.5% for Lumpy Ore.
China position had been weakened by CISA members playing not with their own monies but State Monies to cause Trader., Importer and Steel mills not united as each takes selfish position There is a common saying Chinese never learnt past lessons to be united in good and bad times.
In good times they are not united. Only when China is in danger of losing, then all the Chinese will be united to rally a United Front with strategies to win but then the winning becomes more bitter than sweet. Opening Letter of Credit is easy because "it is the Grandfather money...why cares the losses"
CISA should consider the following strategies to force 40 - 45% price cut
Strategy One
Ministry of Finance, CISA, CCCMC and Ministry of Commerce must implement rule to banks to require 30% CASH DEPOSIT for all traders, importers and steel mills before bank can be allowed to issue 100% Letter of Credit to overseas suppliers . This will effectively cut or slow down the Ordering which will adjust market prices downward and pressure prices in favour of 40 - 45% range unconditonally.
Strategy Two
As Current Total Iron ore stock is approaching more than 110 million MT, further stocking becomes Severe Over Supply, senseless and driven by selfish profit speculation to go against National Objectives. Therefore All Trader, Importers and Steel Mills must be united to stop ordering for at least next 4 months that will caused Baltic Dry Index to plunge heavily worldwide with Freight plunging steeply to pressure FOB to be reduced further. The 3 Biggies depends on BDI to hike Iron Ore prices to stay at 33% . This will weaken 3 Biggies bargaining power and come to open and call for re-negotiation for 40 -45% price cut in favour of CISA Strategy Three
Ministry of Transportation and CISA should implement Increased Bonded Warehouse Charge to control stocking
Strategy Four
Use part of the failed Chinalco US$19.5 Billion allocation to buy controlling shares in existing mines, build railways and port infrastructure im
in other countries.
Strategy Five
Part of the failed Chnalco $19.5 Billion to Buy used Bulk Carriers to open up more suppliers sources that sells on FOB to force prices to dive downward as more Supply will enter market to Exceed Real Demand to force new Price Equilibrium in favour of 40 -45% price cut
Strategy Six
If 3 Biggies maintain unfair Monopolistic Pricing control at 33% and 28% and refused to accept 40 - 45% price cut ----then play more delayed buying, buy extra time and at the same time divert more to new sources and spot markets.
James Simch - Singapore
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