Thursday, November 25, 2010
Pricing the miracle commodity
This blogger has attempted to reverse-engineer the major miners' quarterly ore pricing formula before.
It is not an exact science, but it has concluded that prices tend to rise in line with the average spot price of the trailing quarter, whereas when the price falls, they seem to lag the average.
In the same post, this blogger revealed from industry sources that the contract price for Rio is currently hovering in the high $150s per tonne and BHP slightly below that.
Looking at the current quarter (Q4) for clues to contract pricing for next (Q1), to date the average price in the quarter is around $153.4.
Therefore, with a month to go in the quarter, we're looking at a 2-3% correction in ore prices for Q1.
A key pillar of the terms of trade is looking strong another 4 months out.