LAUNCESTON, Australia, Jan 16 (Reuters) – Imagine for a moment that iron ore was still priced the way it was for decades, in closed-door meetings between miners and steel makers, and then try to visualise what the current level would be.
Whatever number you may have come up with, it’s unlikely to be anything close to the $76.57 a tonne iron ore futures traded in Singapore fetched at the close on Monday.
It’s likely that it would be a far lower figure, given the current seaborne market dynamics of ample, and growing supply, and reasonable, but no longer, surging demand growth.
But the main difference between the long-term contract talks that prevailed up until around 2010 and the current system of short-term deals and spot pricing is the volatility of seaborne iron ore prices.
The SGX futures, which mirror the spot price for cargoes delivered to China, is up 7.4 percent in the first half of January, part of a longer rally that has seen it surge some 31 percent since the start of November.