Reuters: Baosteel, Rio agree sharp 2008 iron ore price
Face was saved between Australia and China by changing the lump and fines premiums rather than going for an across-the-board freight premium. The fact is, Australia ships more lump than Brazil and that is the ore price they really care about, and the blended price is much more palatable than the huge increase in the lump price.
Rio Tinto left lots on the table vs. the current freight rates, but Rio Tinto clearly felt that settling first rather than hiding behind BHP gave them more defense on the hostile takeover attempt. What is telling is if Rio Tinto is starting to react by doing risky stuff like settling price, they are running scared. In my mind, that means the takeover chances are even higher for BHP.
Something happened here and now the ball is in BHP’s court. I expect them to follow suit on price as they have to pass antitrust in Europe, and then if they pass antitrust, they will boost the bid for Rio Tinto in a couple of small steps and let the arbs help them take it.
Lots of fun. I am traveling and will write more when I have more than 5 minutes to do so.
