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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (72449)	2/12/2010 5:11:27 PM
From: Snowshoe	Read Replies (1) \| Respond to of 74559

China reneged on its iron ore contracts in 2008/2009, and now says it will try those four Rio Tinto execs for bribery. The miners are posturing to junk the futures contract system and revert to the spot market... Tension builds over iron ore talks cnn.com For years, the miners were willing to settle benchmark annual contracts below spot prices because they felt that volume security compensated for lower income. The tacit understanding fell apart in late 2008 and early 2009 as spot prices plunged below annual contract prices and steelmakers worldwide defaulted on their commitments, either lifting less tonnage -- mostly the Japanese, South Koreans and European mills -- or, in the case of the Chinese mills, moving away from the annual contracts altogether and securing lower prices in the spot market. The miners discovered, to their horror, that where they thought they had a futures contract agreement, in reality they were giving away a free call option -- the right to buy at a price but not the obligation to do so -- to the steel industry. "The steel industry believes they can have a free call option [on prices] because we perform our contracts and they do not," says a senior mining executive.