PACIFIC COAST MINERALS S.A. DE C.V.


PRECIO DIARIO DE MINERAL DE HIERRO


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March 19, 2010

Iron prices continued to strengthen on Friday, as the MBIO index reached $140.65/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $2.23/tonne, the largest daily gain this week. The index is now $6.72 higher than last Friday.

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Encouraged by rising steel prices, Indian suppliers have seized every opportunity to push up offers.

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They have also been backed by the relative scarcity of Australian and Brazilian material; hence they are unlikely to back down from increased offer prices next week.

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March 18, 2010

The MBIO Index today calculated to $138.42/tonne cfr Qingdao on a 62% Fe basis. This is an increase of $1.09/tonne, and continues the trend of steady upward prices over the past two weeks.

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The Index now stands at almost $10/tonne above the temporary low point last week, and $25/tonne above the beginning of the year.

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Transaction prices for Indian material at 63.5% Fe have risen as high as $148/tonne cfr China, and suppliers are refusing to consider bids below $147/tonne for similar material.

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The high prices have made a number of traders wary of taking on material, so the number of transactions has fallen.

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Market participants are not expecting steel prices to move until next week, which maintain the current strength in the iron ore market for the next few days.

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March 17, 2010

Index jumps to $137.33/tonne. The MBIO Index today calculated to $137.33/tonne cfr Qingdao on a 62% Fe basis.

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This is a substantial jump of $1.90 from yesterday’s figure, and marks yet another 12 month high. The Index is now $75/tonne, or 120%, above its position a year ago.

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The recent strength has come mainly from the supply side of the equation, with increased rail freight and ocean freight costs pushing material prices up, particularly from India.

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Indian Railways has announced a Rupees 300/tonne (US$6.60/tonne) increase in rail charges, irrespective of distance travelled, for all iron ore for the period of 17th to 31st March 2010, and will assess the continuation of the fees at the end of that period.

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Although a lot of material in India is transported by truck, recent ruling limiting the movement of trucks in various towns in India will also tighten supplies by that route.

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It is likely that suppliers will try to pass on the total costs to customers, a process made easier by the flat fee nature of the tariff.

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Ocean freight has also increased for the Supramax route from India East coast to Qingdao, and stood at $24.40/tonne at the beginning of this week, up $0.70/tonne from a week ago and $6.60/tonne on this time last month.

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The market however remains tight, and those mils which need material have no option but to accept the incremental price increases.

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This makes it likely that suppliers will be able to pass on the majority of the rail tariff increase on to customers.

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March 16, 2010

The MBIO Index today calculated to $135.43/tonne cfr Qingdao on a 62% Fe basis, an increase of $0.87/tonne from yesterday’s figure and marks yet another 12 month high.

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Increased talks of a potential increase of 80-90% in the benchmark iron ore agreement for this year have put upwards pressure on spot prices, even though spot prices would still be at a premium to benchmark prices if such a significant increase was achieved.

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The theoretical start of a new benchmark year is now just a little over two weeks away, and negotiations are likely to have continued influence on other aspects of the steelmaking raw materials markets.

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However, it is somewhat of a circular argument for benchmark prices to push spot prices, as the spot market is usually cited as a leading indicator for the longer term contract market. Indian material at 63.5% Fe has now moved into the range of $142-145/tonne cfr China, up $2/tonne at the top end of the range, and offer prices have increased a similar amount.

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58-59% Fe material from India was quoted in the range of $118-120/tonne cfr China.

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March 15, 2010

Index edges up to $134.56/tonne. The MBIO Index today calculated to $134.56/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $0.63/tonne on last Friday’s figure, and marks yet another 12 month high. The strength of the finished steel market in China lent more support to the iron ore spot market, and reported supply side issues in India kept supplies tight.

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In addition, domestic ore concentrates increased over the weekend, with 66% Fe material rose RMB 50-80/tonne to around RMB 1130/tonne ($165/tonne).

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Indian material at 63.5% Fe increased to $142-143/tonne cfr China, with offer prices as high as $147/tonne on an equivalent basis.

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A number of buyers have expressed concern at the current prices, but expectation that finished steel prices will increase in the coming months will give iron ore more upside room.

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March 12, 2010

New 12 month record. The MBIO Index today calculated to $133.93/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $3.73/tonne from yesterday, and marks another 12 month high in the Index. The Index is now more than $5.00/tonne higher than its recent low point on Tuesday, and also exceeds the high levels seen towards the end of February immediately after the Chinese New Year Holidays.

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Transaction prices for Indian material at 63.5% Fe have jumped to $141-142/tonne cfr China, up from $138-139/tonne just yesterday.

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Lower grade fines at 58% Fe have reached as high as $117/tonne on the same basis. In addition, the number of transactions has increased over that seen in recent days, as a number of buyers have moved back into the market.

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The main reason for the recovery in strength in iron ore prices has been the increase in finished steel prices, which has increased sentiment across the market.

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Another factor has been the increase in transactions of Australian material, which had largely been absent from the market over the past couple of weeks.

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The upturn in finished steel prices is expected to have an effect on iron ore prices next week, with traders expecting further price gains. This will put renewed pressure on the benchmark negotiations.

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March 11, 2010

Index increases to $130.20/t. The recovery in the MBIO Index continued today, with the Index calculating to $130.20/tonne cfr Qingdao on a 62% basis.

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This is an increase of $1.20/tonne from yesterday’s figure. Offer prices for Indian material at 63.5% Fe have increased again to around $140/tonne cfr China, as suppliers have taken advantage of rising steel prices in China.

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Not all that gain has yet filtered through to transaction prices, which have risen to $136-139/tonne on the same basis.

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Having broadly been out of the purchasing market over the past two weeks, iron ore stock levels at some steel mills have been drawn down, which may encourage a return to the spot market.

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However, most mills are currently content to continue buying only to satisfy immediate needs.

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March 10, 2010

Index up at $129.00/tonne. The MBIO Index today calculated to $129.00/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $0.39/tonne from yesterday’s figure, and reflects the slow state of the market and a strong showing by some lower grade fines.

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The (relatively) weak state of prices in the iron ore market has meant that steel mills for the most part are not looking to book any cargoes unless absolutely necessary, and the number of transactions has dropped for new imports of material.

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In addition, steel mills are purchasing more material from stocks already held at port from previous deliveries, and which have now become more competitive than new imports.

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The price of lower grade fines at 59% Fe were in the range of $113-114/tonne cfr China, while Indian material at 63.5% was unchanged at $136-138/tonne cfr China.

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March 09, 2010

Index falls again as mills look to local material. The MBIO Index today calculated to $128.61/tonne cfr Qingdao on a 62% Fe basis.

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This is a decrease of $1.08/tonne from yesterday’s figure, and reflects the lower market sentiment in the market.

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Chinese steel mills are reported to be taking more material from domestic sources, which are more competitive at the current high spot price levels, and the number of transactions for imported material dropped.

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Indian offer prices have softened in response, and transaction prices have fallen as a result.

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The range for Indian material at 63.5% Fe is now at $136-138/tonne cfr China, down from $137-138/tonne yesterday.

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In addition, 58% Fe material from the same source is now around $109-110/tonne cfr China, which is a slight increase from recent days.

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March 08, 2010

Index slips on reluctant buying. Incorporating data from Steelhome, the MBIO Index today calculated to $129.69/tonne cfr Qingdao on a 62% Fe basis.

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This is a decrease of $0.62/tonne from last Friday’s figure, and reflects the decline in the spot market. Increasing inventories and weak steel prices are keeping negative pressure on iron ore spot prices, and transaction prices for Indian material at 63.5% Fe have dropped again over the weekend, to $137-138/tonne cfr China, down from $137-139/tonne. Inventories at ports of iron ore have again increased above 70m tonnes.

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The number of transactions also remains low, unsurprisingly in a falling market, as steel mills sit tight and wait to see where the market goes.

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There were a couple of reported transactions from Brazil and Australia, both at prices significantly less than those seen in recent weeks, and many market participants expect prices to fall further this week.

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March 05, 2010

Index holds at the end of the week. The MBIO Index today calculated to $130.31/tonne cfr Qingdao on a 62% Fe basis. This is a slight increase of $0.36/tonne from yesterday’s figure, and reflects the continuing uncertainty in the market.

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The majority of transactions for Indian material at 63.5% have tightened into the range of $137-138.50/tonne cfr China, although some deals are reported to have been done outside that range, as not all suppliers have been willing to drop their offer prices.

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However, the number of transactions taking place has dropped in the face of weaker demand, and some suppliers are struggling to transact deals at prices less than that quoted.

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One supplier reported that buyers are not interested in material of the same quality at $135-136/tonne cfr China.

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In addition, price weakness in the lower grade fines has impacted the market, giving buyers more opportunity to negotiate better prices for higher grades.

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March 04, 2010

Index drops back below $130/tonne. The MBIO Index today calculated to $129.95/tonne CFR Qingdao on a 62% Fe basis.

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This is a decrease of $0.30/tonne from yesterday, and reflects the slight decline in prices for higher grade fines.

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Transaction prices for Indian material at 63.5% Fe have dropped to $137-139/tonne cfr China, moving towards the bottom end of the range, and down from $137-140/tonne yesterday.

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Offer prices for lower grade fines have continued to fall, by up to $3/tonne for 58% Fe material from India, although transaction prices have not moved significantly over the same period, and offer prices for higher grade materials in some cases remain strong, with suppliers unwilling to significantly mover their position.

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The falling prices are keeping buyers out of the market for now, and the number of transactions remains low. Many steel mills have tight margins at the current iron ore prices, at least on the spot market basis, and purchasing levels at ports of domestic and custom cleared iron ore have also dropped. Prices are likely to drop further in the short term.

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March 03, 2010

Index weakens as predicted. As predicted, the MBIO Index today fell to $130.25/tonne CFR Qingdao on a 62% Fe basis.

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This is a decline of $2.51/tonne from yesterday’s figure, and unwinds a significant part of the gains made over the past two weeks.

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The number of transactions for higher grade material has fallen, as offer prices are steadily declining and most market participants prefer to wait for a more clear market direction before committing to purchases.

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Most buyers expect traders and suppliers to drop offer prices first to secure sales agreements. There were more transactions for lower grade materials at around 58% Fe content, although prices for this grade of material have fallen significantly in recent days.

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Offer prices for 58% Fe material are in the range of $111-113/tonne CFR China, down $2-5/tonne from last week. Offers for 62% Fe material have dropped to around $132/tonne CFR China, with few reported takers. It is likely that prices will weaken further in the coming days.

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March 02, 2010

Index holds at 12 month high. The MBIO Index today calculated to $132.76/tonne CFR Qingdao on a 62% Fe basis, a slight increase of $0.13/tonne from yesterday’s figure, although this does set another 12 month high.

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After the surge in iron ore prices since the end of the Chinese New Year holidays, sentiment now starts to show some sign of weakening, although that is not an opinion shared by all market participants.

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Transactions of Indian material at 63.5% Fe have remained in the range of $138-140/tonne cfr China, and offers in the range of $142-143/tonne on the same basis.

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These offer prices are a slight decrease on recent days, suggesting that buyers are holding back from purchases, and suppliers are having to be more competitive in order to secure sales.

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Part of the issue has been freight related. The surge in buying in anticipation of the increase in the Indian export tax has led to a jump in freight rates. The India to China Supramax rate has risen to $22.60/tonne for iron ore, up from $19.20/tonne a week ago. The $3.40/tonne increase accounts for approximately half of the increase in the Index since the end of the Chinese holiday.

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In contrast, rates from both Australia and Brazil have fallen, with the cost of delivering iron ore from Brazil barely any more than from India.

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March 01, 2010

Another week, another increase. The MBIO Index today calculated to $132.63/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $0.40/tonne from last Friday’s figure, and sets another 12 month high. Transaction prices for Indian material at 63.5% Fe have remained in the same range as the end of last week at $138-140/tonne cfr China, but have firmed slightly within the range leading to the main factor in the slight increase in the Index.

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Offer prices remain slightly above this range, and at least one deal was heard at several dollars more for the same material, but was unconfirmed.

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News that the Indian government wont raise taxes on iron ore export duties in the immediate future has not yet negatively impacted prices, even though some of the previous price strength was based on an expectation of the tax increases.

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This may unwind in the coming days, leading to a drop in spot prices, if underlying market fundamentals don’t support the current levels. The number of offers from Indian suppliers has fallen, but this is more due to uncertainty than lack of material.

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February 26, 2010

Index up again on strong market sentiment. The MBIO Index today calculated to $132.23/tonne cfr Qingdao on a 62% Fe basis.

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This is an increase of $1.47/tonne from yesterday’s figure, and completes a week of continual gains after the end of the Chinese New Year holidays.

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The Index is now $6.74/tonne above its position a week ago, and today’s figure sets another annual record. Offers for Indian material at 63.5% Fe have increased to more than $140/tonne, and transactions have moved up slightly from yesterday to now stand in the range $138-140/tonne cfr China. Market participants report that there is little to no chance of obtaining material at less than $138/tonnefor this grade.

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Participants also report that the main buying impetus has come from traders rather than steel mills. Stock of iron ore at mills are sufficient for immediate needs, and stocks at ports have risen 1.3 million tonnes from before the holidays to reach 68.5m tonnes.

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Steel mills are in many cases waiting for the finished steel market to improve later this quarter before committing to further purchases, while traders are looking to have material on hand to take advantage of this expected buying upturn.

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February 25, 2010

Index reaches another annual high. The MBIO Index today calculated to $130.76/tonne CFR Qingdao on a 62% Fe basis.

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This is an increase of $1.64/tonne from yesterday’s figure, and marks another milestone in the Index, as it reaches above the $130/tonne mark for the first time since the middle of September 2008.

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The figure is also well above the highs seen at the beginning of this year, and more than 25% higher than the recovery and surge in prices in August 2009.

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The main impetus for the increase in the Index has been a jump in the prices of Indian material. As predicted, the market conditions have allowed transaction prices for Indian material at 63.5% Fe to jump from $135-136/tonne to $137-140/tonne over the past 24 hours, with rumours of higher priced material also in the market.

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Buyers report that material is no longer available at less than $137/tonne. Market expectations that the Indian government will impose an increased tax on exports of iron ore has seen a rise in short-term bookings, and some suppliers are already pushing those costs on the buyers. It is likely that the Index will see further gains coming up.

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February 24, 2010

Offers up but transactions steady. The MBIO Index today calculated to $129.12/tonne CFR Qingdao on a 62% Fe basis.

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This is a slight increase of $0.12/tonne on yesterday’s figure, and reflects the steady position of transactions in the market.

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Offer prices for Indian material at 63.5% Fe have increased to as high as $142/tonne CFR China in response to the positive market conditions.

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Transactions however have remained broadly steady in the range of $135-136/tonne on the same basis, which meant that the Index has remained consistent this week. The ever-present factors of a tight iron ore market, and less strong steel prices, means that margins are continually under pressure for Chinese steel mills.

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The expectation of improved construction steel markets in China, leadings mills to be keen to make sure of sufficient material to cover any production requirements and increases, along with the aggressive increases in spot price offers, suggest that the iron ore market will see further price gains in the short term.

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February 22, 2010

Index jumps after Chinese holidays. The MBIO Index today calculated to $128.63/tonne CFR Qingdao on a 62% Fe basis.

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This is an increase of $3.14/tonne on last week’s figure, and reflects the resumption of buying activity after the holiday period. As predicted, buying activity has continued strongly after the resumption of business activity from the holidays, and iron ore prices have jumped by 2.5%.

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Transactions of Indian material at 63.5% Fe are now in the range of $135-136/tonne CFR China, up from $128-131/tonne.

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Although the activity in transactions fell to very low levels over the past week, this hasn’t significantly impacted deliveries and shipments of iron ore, from material that was ordered in previous weeks.

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Reports that delays are occurring in Australian ports to load iron ore as the infrastructure looks to cope with the high volumes of material point to the underlying strength in Chinese demand for imported material.

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Steel mills are looking ahead to the seasonal improvement in construction business demand, and making sure that they have sufficient stocks of material in place. The expectation of a big increase in the benchmark price continues to build, and many mills are making sure of material now rather than later.

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February 19, 2010

Index flat in New Year Holiday slowdown. As a result of the quiet market conditions during the Chinese New Year holidays, the MBIO Index today remains unchanged at $125.49/tonne CFR Qingdao on a 62% Fe basis.

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February 18, 2010

Index flat in New Year Holiday slowdown. As a result of the quiet market conditions during the Chinese New Year holidays, the MBIO Index today remains unchanged at $125.49/tonne CFR Qingdao on a 62% Fe basis.

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February 17, 2010

Index flat in New Year Holiday slowdown. As a result of the quiet market conditions during the Chinese New Year holidays, the MBIO Index today remains unchanged at $125.49/tonne CFR Qingdao on a 62% Fe basis.

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February 16, 2010

Index flat in New Year Holiday slowdown. As a result of the quiet market conditions during the Chinese New Year holidays, the MBIO Index today remains unchanged at $125.49/tonne CFR Qingdao on a 62% Fe basis.

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February 15, 2010

Index flat in New Year Holiday slowdown. As a result of the quiet market conditions during the Chinese New Year holidays, the MBIO Index today remains unchanged at $125.49/tonne CFR Qingdao on a 62% Fe basis.

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February 12, 2010

Index steady as market packs up for holiday. The MBIO Index today calculated to $125.49/tonne CFR Qingdao on a 62% Fe basis.

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This is an increase of $0.13/tonne from yesterday, and reflects the quietening market as most market participants close down purchasing as the Chinese New Year holiday starts. The market was quiet today, with little movement in the Index.

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Transactions of Indian material at 63.5% Fe remain in the range of $128-131/tonne CFR China. Offer prices have increased to as high as $135/tonne on the same basis, while some aggressive counter-offers were seen at very low prices.

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However, neither side seemed to make much progress. Considerable speculation continues to surround the benchmark price negotiations which are in full swing despite the impending holidays.

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Announcements by Vale that they will struggle to service all market demands this year, and suggestions of an export tax on iron ore by the Brazilian government will put upward pressure on the iron ore spot market, and ultimately the benchmark negotiations. The MBIO Index will continue to be published throughout the period of the Chinese New Year.

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February 11, 2010

Index up in thinning market. The MBIO Index today calculated to $125.36/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $1.58/tonne from yesterday, and marks some strong deals at the effective closure of the market before the holidays in China next week.

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The number of transactions conducted has fallen in recent days, with the market getting ready for next week’s New Year holiday.

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Although a good number of transactions has been seen in the earlier part of this week, it is likely that going forward transactions will be few and far between until the end of February.

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The market is expected to see further price growth after the holidays finish. Unconfirmed reports that steel mills will accept a 40% price increase in the benchmark price for 2010 fairly early on in the negotiations suggests that they are concerned that the market may move further against them.

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Spot prices are a leading indicator of benchmark price negotiations, and already stand at almost 90% higher than benchmark prices on an equivalent delivered basis.

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The expectation of higher spot prices towards the end of this quarter could lead to bigger benchmark price increases.

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February 10, 2010

Index up on unyielding offers. The MBIO Index today calculated to $123.78/tonne CFR China on a 62% Fe basis.

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This is an increase of $0.87/tonne on yesterday’s figure, and takes the Index close to the level seen at the end of last year.

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As discussed yesterday, the increase reflects the firm hand that suppliers are taking with offer prices, while looking ahead to a strong iron ore market after the Chinese New Year holidays.

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Most suppliers expect prices to remain strong, or increase, at the end of February, so are reluctant to compromise on offer prices in the meantime.

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Offers of Indian material at 63.5% Fe are in the range of $130-132/tonne CFR China, and transactions are in the range of $128-131/tonne on the same basis. The number of transactions remains low, and are not expected to increase during the rest of this week. Reports of an increase in export taxes of Indian material have pushed offer prices up, although the details and date of implementation are not yet clear. In addition, the government of Brazil has suggested a similar system of iron ore export taxation, to be imposed on both spot sales and benchmark tonnage, which will have an upward pressure on prices later this year.

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February 09, 2010

Quiet market leads to steady Index. The MBIO Index today calculated to $122.91/tonne CFR Qingdao on a 62% Fe basis.

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This is a slight decrease from yesterday of $0.16/tonne, and reflects the quiet iron ore spot market. The market is getting quieter as more participants prepare for the holidays, and the ability to complete paperwork before the holiday decreases.

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Transactions of Indian material at 63.5% Fe were in the range of $127-130/tonne CFR China, slightly up on yesterday but in line with the levels seen earlier in the week.

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Lower grade material from India, at 58% Fe, was traded at $106/tonne CFR China. The quieter trend is likely to continue this week, with buyers only tempted into the market by very competitive prices.

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It is likely that most suppliers will prefer to wait until after the holidays are finished to offer significant tonnages of material.

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February 08, 2010

Index pauses in thin business. The MBIO Index today calculated to $123.07/tonne CFR Qingdao on a 62% Fe basis.

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This is a decrease of $0.80/tonne from last Friday’s figure. Business can be regarded as thin over the past few days, as many buyers prepare for the Chinese New Year Holidays which officially start next week.

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Following the strength in the market at the end of last week which saw the Index move up several dollars, Indian suppliers have further increased offer prices over the weekend.

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Offers of Indian material at 63.5% Fe are now in the range of $131-132/tonne, but transactions have remained in the range of $127-129/tonne CFR China, which is actually slightly down on last week.

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The number of transactions taking place has also dropped, as bargain hunters have exited from the market again, and buying at the moment is concentrated on those with a short-term need for material.

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Domestic material is slightly more expensive than imported material, but remains available to smaller mills, while larger mills are reported in the main to have adequate stockpiles.

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February 05, 2010

Index ends week on a high. The MBIO Index today calculated to $123.87/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $0.62/tonne from yesterday’s figure, and marks the end of a week of increases in iron ore prices.

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The Index is now $4.70/tonne above where it stood a week ago, and remains well above levels seen in 2009. Although many traders and market participants had been waiting for prices to fall further, a significant part of the market seems to have called the bottom of the market at the end of last week, and started purchasing again in expectation of higher prices after the Chinese New Year holidays.

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Transactions of Indian material at 63.5% Fe have reached the range of $127-130/tonne CFR China, while some offers had reached as high as $136/tonne on the same basis.

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Most buyers were not ready to take material at that price in the current market, and most offers are more realistic.

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The number of transactions is likely to fall in the coming days as it becomes more difficult to conclude paperwork and letters of credit before buyers go on holiday, although may have limited impact on prices as supplies from India remain tight.

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February 04, 2010

Index up on rumours of Indian export tax. The MBIO Index today calculated to $123.25/tonne CFR Qingdao on a 62% Fe basis.

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This is an increase of $1.82/tonne from yesterday’s figure. The main impetus to the price rise seems to have come from rumours of a rise in the Indian export tax of an additional 10% for all iron ore material.

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The additional taxes are thought to come into effect on 15th of February, and would coincide with the start of the New Year holiday in China. This could push fob prices upwards by as much as $8/tonne, and have a similar impact on delivered prices.

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So far Indian material at 63.5% Fe has increased from $126-128/tonne CFR China to $127-130/tonne on the same basis. Sesa Goa fines are being offered at $131-132/tonne.

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February 03, 2010

Index steady after yesterday’s gain. The MBIO Index today calculated to $121.43/tonne CFGR Qingdao on a 62% Fe basis.

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This is a small increase of $0.10/tonne from yesterday’s figure, and consolidates the increases seen at the beginning of the week.

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The majority of transactions of Indian material at 63.5% Fe have remained in the rmage of $126-128/tonne CFR China, but reports of a shipment from Sesa Goa, for admittedly of better quality material, at up to $5/tonne more than the typical rate has pushed optimism up amongst suppliers.

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As a result, suppliers are expected to push their offer prices up in the next few days. Whether they will be successful remains to be seen, as negative factors remain in the market, particularly the slowdown in the market ahead of the Chinese New Year.

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February 02, 2010

Index up on market sentiment. The MBIO Index today increased to $121.33/tonne CFR Qingdao on a 62% Fe basis. This is a rise of $1.31/tonne from yesterday’s figure, based on an increased expectation of higher prices later this month.

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Indian material at 63.5% Fe has increased to the range of $126-128/tonne CFR China, up $1/tonne from the past few days, aided by the refusal of the major suppliers to drop their offer prices. Some transactions had been seen by smaller players in recent days at lower prices, who were reluctant to be left holding high-priced material, but the larger suppliers and trading houses had been reported to be taking a harder line.

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Falling coke prices in Northern China will boost lower grade iron ore. Grade II coke in Shandong has fallen to RMB2000-2050/tonne ($293-300/tonne), below the February reference price of RMB2100/tonne, with further price falls expected ahead of the Chinese New Year. This will aid iron ore in the 57-59% Fe range, which requires a relatively higher consumption of coke in the blast furnace.

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February 01, 2010

Index retains some strength over the weekend. The MBIO Index today calculated to $120.02/tonne CFR Qingdao on a 62% Fe basis.

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This is an increase of $0.85/tonne from last Friday’s figure, and just takes the Index back across the $120/tonne mark.

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However, the increase has not really been due to a noticeable increase in market activity, and in fact many buyers are starting to exit the market ahead of the Chinese New Year later this month. Large scale market activity is unlikely to be seen until towards the end of this month.

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Import prices for Indian material at 63.5% Fe have remained in the range of $125-127/tonne CFR China since the middle of last week, but there are signs that the slowing demand side could push import prices down over the coming weeks.

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This probability is increased by domestic material remaining competitive at current import prices, further reducing demand.

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January 29, 2010

Spot iron ore price hold steady at $125-127. The MBIO Index today calculated to $119.17/tonne CFR Qingdao on a 62% Fe basis.

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This a slight decline of $0.15/tonne from yesterday, and reflects the hold in transaction prices from the middle of the week.

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After a negative start to the week, as transaction and offer prices fell as suppliers chased a small number of buyers, prices since the middle of the week have held as major suppliers look to maintain offer prices at current levels in order to protect margins on cargos taken earlier in the month.

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The number of transactions however remains low, with many buyers now looking to leave the market until after the New Year holidays.

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In addition, domestic iron ore suppliers have taken advantage of the high spot prices to increase production in the last two months. Despite the inherent cost-disadvantage of using lower grade and lower Fe material, the material remains economic at these prices.

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A sustained surge by domestic producers could have a significant impact on spot prices in the coming months, and ultimately the benchmark price negotiation.

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January 28, 2010

Index bounces as prices firm. The MBIO Index today calculated to $119.32/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $0.98/tonne from yesterday, and marks the first increase for almost two weeks.

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The strength in the Index comes about as prices firm slightly following several days of consistent declines.

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Prices of Indian material at 63.5% Fe have firmed in the range of $125-127/tonne CFR China, as buyers start to take advantage of the reduced offers available from Indian suppliers.

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However, a number of very competitive offers continue to be seen in the market over the past 24 hours, as the number of transactions remains relatively low, and further price weakness over the coming few weeks is possible.

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January 27, 2010

Index down further as offers drop. The MBIO Index today calculated to $118.34/tonne CFR Qingdao on a 62% Fe basis.

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This is a decline of $2.01/tonne from yesterday, and takes the Index closer to where it started to the month, having lost almost $10/tonne from its peak.

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Recent weakness in the Index has been facilitated by a decline in offer prices from Indian suppliers. However, even those offers that are competitive in the current market are not getting many responses as buyers wait for prices to fall further.

In addition, material available at ports from previous deliveries is reported to be cheaper than material for forward delivery, further removing the incentive to order new material. Offers of Indian material at 63.5% Fe have dropped as low as $127/tonne CFR North China, while 58% Fe material from the same origin is transacting at around $100/tonne CFR North China.

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The expectation that prices will fall further has slowed the number of transactions, and as the Chinese New Year holidays approach, some participants will exit the market until business resumes at the end of February.

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This is likely to lead to further price weakness in the coming month.

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January 26, 2010

Index down again as demand retreats. The MBIO Index today calculated to $120.35/tonne CFR Qingdao on a 62% Fe basis. This is a decrease of $2.45/tonne from yesterday, and continues the downward trend seen since the beginning of last week. Prices have now fallen 6% from their peak in mid-Jan.

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This is not a huge fall considering the movements that have been seen over the past two years, but does mark a consistent but steady trend, with seven consecutive days of falls.

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Offer prices for Indian material at 63.5% Fe have dropped, but not as much as transaction prices, suggesting a bigger dislocation in market expectations between suppliers and consumers. Transactions are now in the range of $126-128/tonne, down $2-23/tonne from yesterday.

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Despite the reduced prices, buyers have shown little interest in taking significant tonnages of material, and most are waiting out of the market in expectation of further falls.

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There are reports that some traders are offering material at lower prices in order to gain a quick sale, but reasonable stock piles at ports and steel mills are allowing buyers to be aggressive in price demands.

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January 25, 2010

Down again on weak transactions. The MBIO Index today calculated to $122.80/tonne CFR Qingdao on a 62% Fe basis. This is a decrease of $0.31/tonne from last Friday’s figure, and continues the downward trend that was seen all last week.

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Transaction prices for Indian material at 63.5% Fe have fallen to $127-130/tonne CFR China, although offer prices remain in the range $130-133/tonne.

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Suppliers are maintaining their position that they do not need to reduce prices in the current market, although offer prices have certainly come down from the levels seen two weeks ago, and some traders are reported to have offloaded material at attractive prices to guarantee a sale at near-current levels.

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The Chinese New Year celebrations are starting to become foremost in the mind of market participants, and with falling prices many buyers are expected to stay out of the market until after the holiday.

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This may cause further weakness this month, but will cause a rebound at the end of February.

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January 22, 2010

Further fall on weaker market sentiment. The MBIO Index today calculated to $123.11/tonne CFR Qingdao on a 62% Fe basis.

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This is a small decline of $0.16/tonne from yesterday’s figure, reflecting the market sentiment which has continued to weaken throughout the week.

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The Index saw declines every day of this week, having reached its 12 month high at the end of last week. Although prices have now fallen close to $5/tonne from the peak, they do remain very high in the context of prices over the past year, and significantly above the current benchmark equivalent.

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Indian material at 63.5% Fe stayed as high as $133/tonne CFR China as recently as yesterday, but many market participants by today felt that prices had to be below $130/tonne for further transactions to be made.

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Suppliers retain their optimism however, and are looking to see better prices later in the year, so don’t seem to be in any particular hurry to reduce offer prices, except to keep a minimum number of transactions conducted.

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As a result, while prices are expected to weaken further next week, they will retain a significant strength in historical terms.

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January 21, 2010

Index down as buyers stay away. The MBIO Index today calculated to $123.27/tonne CFR Qingdao on a 62% Fe basis. This is a decline of $1.47/tonne from yesterday. Transactions of Indian origin material at 63.5% Fe have dropped to $130-133/tonne CFR China, down from $132-133/tonne yesterday.

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This decline is due to buyers getting hints of a weakness in the market, and then declining to take any material in the expectation of better prices in the immediate future.

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As a result even at these lower prices, and with offer prices dropping to match them, few transactions have taken place in the recent days.

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Restricted supply is keeping optimism high at Indian suppliers though, and offer prices are not leading transaction prices downwards in any panic selling.

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Most suppliers are content to withdraw offers for the moment and wait for demand to return. There are some suggestions that steel mills would be interested in returning to the market if prices for 63.5% material dropped some way below $130/tonne CFR China.

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January 20, 2010

Index continues downward trend this week. The MBIO Index today calculated to $124.74/tonne CFR Qingdao on a 62% Fe basis. This is a decrease of $1.58/tonne from yesterday’s figure, and continues the downward trend seen since the beginning of the month.

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Continuing the trend seen this week, the number of transactions has been at low levels, and even the number of offers available from suppliers are reported to be at lower levels than usual.

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This has partly been due to the reduction in supply availability from India, and also to the unwillingness of the steel mills to take material at the current high levels.

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The current downward trend is increasing optimism among buyers, who are hoping for further falls, and as a result are prepared to wait before purchasing material.

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This will have the effect of increasing the rate of decline in the initial period, but may cause a sharper rebound as mills are forced back into the market with lower stocks on hand.

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Prices for Indian material at 63.5% Fe are in the range of $132-135/tonne CFR China, with prices pushing the bottom end of that range. Indian fines at 58-59% Fe were traded at around $110/tonne and 57-58% Fe material from the same source at $105-106/tonne.

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January 19, 2010

Index down as transactions remain subdued. The MBIO Index today calculated to $126.32/tonne CFR Qingdao on a 62% Fe basis. This is a decline of $0.90/tonne from yesterday.

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The number of transactions is down from recent weeks, with few being conducted over the past 24 hours. Although there is a general belief in the market that underlying demand remains strong, most Chinese steel mills are waiting for the market direction to become more clear, and for prices to correct downwards.

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Subdued conditions in the steel market have also had a negative effect on the iron ore prices, and with likely further to go. However, increasing freight prices are pushing up landed costs. All three of the major routes have seen an increase over the past week.

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The Supramax rate from India rose from $21.20/tonne to $22.20/tonne over the past week, while the Capesize routes from Australia and Brazil increased by $1.50/tonne and $4.75/tonne, to $13.00/tonne and $31.50/tonne respectively.

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January 18, 2010

Index slips on slow transactions. The MBIO Index today calculated to $127.22/tonne CFR Qingdao on a 62% Fe basis. This is a decrease of $0.63/tonne from last Friday’s figure, and takes the Index back to levels seen in the middle of last week. The Index has now moved in this range of $126-127/tonne over the past 10 days.

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The decrease reflects the lower number of transactions seen over the weekend, as steel mill buyers resist the high prices in the face of squeezed margins. The strength of the market seems to be based on the supply side of the equation, with a desire by steel mills to hold sufficient stocks to take them though the Chinese New Year in mid-February.

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Some smaller mills are torn between paying the current higher prices on offer from the Indian suppliers, or look to source material elsewhere, including from port stocks.

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Larger mills, which are reported in most cases to have sufficient material for the holiday period, are largely absent from the market, and are confident that Indian suppliers will accept a small price correction by reducing their offer prices. This seems to be likely as interest slows ahead of the holidays, although rising freight rates will blunt any falls.

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January 15, 2010

Index gains as suppliers resume push. The MBIO Index today calculated to $127.85/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $0.65/tonne from yesterday, and sets another annual high in the Index, slightly ahead of the figure seen a week ago.

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Transaction prices have edged up slightly over the past 24 hours, as suppliers start to push again for higher prices. Transactions of Indian material at 63.5% Fe have increased to $134-136/tonne CFR China, up from $133-135/tonne yesterday, while offer prices have advanced to $136-140/tonne CFR China on the same basis.

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Negative sentiment in the market seems to have receded, allowing the upward progression to resume, although the fundamentals in the market have not really changed. Buyers have in some cases been forced to recognize that a price collapse is not imminent, pushing them back into the market, which is in itself giving some support to prices.

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The cancellation by Baosteel of the planned price increases for February is expected to have some slowing effect on the market, in particular as some iron ore market participants quoted the increase as a sign of strength in the market. However, there is no sign of that yet, and the effect may be swamped by other factors.

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January 14, 2010

Pause in Index as opinions divide. The MBIO Index is essentially unchanged today and calculated to $127.20/tonne CFR Qingdao on a 62% Fe basis.

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This is a slight decrease of $0.04/tonne from yesterday’s figure. The market sentiment has paused over the past 24 hours, following a sharp decline and increase in quick succession. Traders have reported that they are seeing little market pressure in either direction, with steel mills continuing to be concerned about the risks of buying at these levels.

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Capital restraints, particularly for smaller mills, are pushing material out of reach at the current price, although this may have little impact in a market with sufficient demand.

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The main issue continues to be restocking before the Chinese New Year in February. A number of mills have reported that they now have sufficient stocks, which will cause demand to slow somewhat over the rest of the month, but normal consumption levels and tight supply will keep prices firm.

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January 13, 2010

Rebound takes Index back close to annual high. The MBIO Index today calculated to $127.24/tonne CFR Qingdao on a 62% Fe basis.

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This is a increase of $3.35/tonne from yesterday’s figure, and takes the Index back close to its 12 month maximum, seen at the end of last week.

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The beginning of this week had seen a retrenchment in prices of material from India, with quotes for 62% Fe material effectively losing $10/tonne on a delivered basis in the course of a week.

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Indian material at 63.5% Fe had fallen from around $136/tonne CFR China to $131/tonne on the same basis by yesterday, but the past 24 hours have seen a recovery in these prices as buyers have slowly returned to the market. Transactions for 63.5% Fe material have moved back into the range of $133-135/tonne CFR China, aided by moves by Baosteel to increase February steel prices by up to RMB300/tonne ($44/tonne) on the basis of an optimistic outlook for demand.

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January 12, 2010

Index sees further correction. The MBIO Index today calculated to $123.89/tonne CFR Qingdao on a 62% Fe basis. This is a decline of $2.42/tonne from yesterday, and marks a noticeable fall from the recent peak of the market, when it reached $127.61/tonne on a 62%Fe basis at the end of last week. The market had been influenced by very high offer prices in recent weeks, and although transaction prices never reached the highest offer prices, pressure from buyers has pushed prices back a little. The number of transactions seen on the spot market had fallen in any case from previous numbers, with a lot of buyers preferring to wait and see rather than commit to purchases at the current prices. Transaction prices had increased under the influence of those buyers who had to commit to purchasing due to low stocks, and those traders who expected the rally the continue until next month at least.

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We still expect spot prices to maintain strength over the next few weeks, as underlying demand remains good and supply constrained, but prices may fall a little further in the coming days until buyers return to the market.

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January 11, 2010

Index down as mills push back. The MBIO Index today calculated to $126.31/tonne CFR Qingdao on a 62% Fe basis. This is a decline of $1.30/tonne from last Friday’s figure, and marks the first significant decline for over a month. Although this does not seem like the start of a major correction, transaction prices for Indian material have slipped back a little from last week’s levels as Chinese buyers hold back from taking any material at these prices. Offer prices for Indian material at 63.5% Fe have receded back from the $140/tonne CFR China level seen last week, and transaction prices for the same material have dropped from the range of $133-137/tonne to $133-135/tonne over the weekend.

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A slide in Chinese finished steel prices has put pressure on steel mills’ margins, and many buyers are looking to replenish stocks, if at all, from port supplies rather than ordering new import material.

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Tight supply will continue to keep prices above a certain level, with the Index likely to maintain well into three figures through the Chinese New Year.

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January 8, 2010

Big rise in Index on supply tightness. The MBIO Index today calculated to $127.61/tonne CFR Qingdao on a 62% Fe basis, taking it to another annual high, and well into the territory not seen since the boom prices of early 2008. This is an increase of $4.39/tonne from yesterday, and marks one of the biggest daily movements seen so far.

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Offer prices have remained fairly steady over the past 24 hours, but transaction prices have played catch up. Indian material at 63.5% Fe is now in the range of $133-137/tonne CFR north China, and are still moving towards the top end of that range if material was available. The material supply tightness, particularly from India, is pushing this to a great extent, which means that the number of transactions is relatively low.

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Mills are looking to stock material before the Chinese New Year Celebrations in February, suggesting that this month will remain strong. Steel prices have corrected in recent days, which is squeezing margins at steel mills, and buyers are looking to stretch existing supplies, utilize material from stockpiles at ports and material being delivered from previous spot purchases, rather than take material at the current prices. Those that have to come to the market are likely to continue to pay increasing prices.

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January 7, 2010

Index up further on strong buying. The MBIO Index today calculated to $123.22/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $1.27/tonne from yesterday.

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Buying ahead of the Chinese New Year in February is driving the market, allowing suppliers to continue to push asking prices higher. Indian material at 63.5% Fe is being sold around $133/tonne CFR north China, up from the range of $130-133/tonne yesterday as offer prices continue to exceed $135/tonne on the same basis.

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While the market is continuing to take material at these elevated prices, there are some concerns appearing the market about the price level. A number of traders have reported that they wont take any more material from imports, but will look at taking material from port stockpiles. In addition, today’s fall in Chinese steel futures and equities points to a squeeze on steel mills’ profits.

However, material tightness will keep prices from collapsing. News from India that the supreme court has upheld the ban on exports Obabalpuram Mining Company (OMC) will keep concerns about supply uppermost in the mind of those buying for forward demand.

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January 6, 2010

Index continues climb. The MBIO Index today calculated to $121.95/tonne CFR Qingdao on a 62% Fe basis, continuing its steady upward progression. This is an increase of $2.10/tonne from yesterdays figures, and marks another annual high.

Transaction prices for Indian material at 63.5% Fe have again increased over the past day, moving into the range of $130-135/tonne CFR North China, and buyers have reported that material below $130/tonne is not available any more. Offer prices for the same material have increased ahead of transactions to $133-135/tonne CFR China.

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Those buyers with low stocks have little choice but to accept the higher prices, but those with more material in hand are preferring to wait and see which direction the market will take. While there are no significant negative impacts obvious on the horizon, some participants are expecting prices to moderate after the Chinese New Year holidays in February.

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January 5, 2010

Onwards and upwards. The MBIO Index has continued to rise rapidly, today calculating to $119.85/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $2.39/tonne from yesterday, and continues the upward trend seen since the beginning of December last year. The increase over the past month now totals over $20/tonne, and the Index is now more than double its low point in October 2008.

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The impetus behind the growth has been a number of factors, including rising steel prices and tight material supply from India. Suppliers of Indian material have been quick to capitalize on this, with offer prices continually increasing ahead of transactions. Offers for 63.5% Fe material of Indian origin have increased to more than $130/tonne, with transactions now reaching the range of $126-128/tonne CFR China for the same material.

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There are some expectations that prices have reached their short-term peak, and will continue at similar levels throughout the rest of the week. However, at least some of the buying of physical material is based on the expectation that prices will continue to rise in the coming weeks, and after the material is delivered to Chinese ports, and there exists a significant positive sentiment.

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January 4, 2010

Export tax feeds through to higher delivered prices. The MBIO Index today calculated to $117.46/tonne CFR Qingdao on a 62% Fe basis. This is an increase of $4.12/tonne from last Friday’s figure.

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Despite the slow number of transactions that have happened in recent days, as buyers and steel mills try to digest the sharp increases in prices that have been seen over the past week, transaction prices have continued to increase. Part of the driver for this has been the imposition of an export tax on iron ore fines by the Indian government, which suppliers have tried, largely successfully, to pass directly onto customers. This has had the effect of increasing delivered prices by several dollars.

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Suppliers of Indian material have continued to push offer prices, although these prices remain some distance ahead of reality at the moment, and the Index reflects the majority of the transactions at a more measured (albeit still high) level.

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As more participants return to the market this week, the market direction will become clearer, and it remains to be seen whether the very high offer prices will be achieved.

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January 2, 2010

The MBIO Index today calculated to US$113.34/dmtone CFR Qingdao on a 62% basis.

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This is an increase of USD 3.77 per tonne from yesterday, and takes the index to its highest point. The price remains the same and starts 2010 with a bang. A number of factors have combined to push prices rapidly higher, including freight rates from India, some mine closures in India due to the Government action and restocking in China.

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The outlook for prices in 2010 remains positive, although the upside to spot prices will be limited by the increasing economic sense of utilizing domestic ore. Higher coke prices will keep higher grade imported iron ore popular for steel mills.

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Pacific Coast Minerals has been flooded with contract offers and Letters of Intent for its high quality iron ore averaging a 69% FE level. Due to its low cost production and close proximity to all China ports offers in excess of what India is currently selling their iron ore for are pouring in.

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Mr. Steven Reynolds, Chairman of the Board stated: "Our high quality compared to that of India's are raising attention in the world market. We are very close to contracting for our total production over the next five years. We are only dealing with MT103's and L/C's that call for a large deposit being paid." He continued stating: "We have some major decisions to make as we have 5 direct importers in China currently negotiating with Pacific Coast Minerals to absorb their entire production of 58,000,000 tons per year over the next 10 years with spot pricing market indexes tied in. The future is great for Pacfic Coast Minerals."

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January 1, 2010

The cash price for iron ore delivered to China, the world's biggest buyer, rose the most in more than five months on concern exports from India will slow, boosting expectations for producers in annual price talks. The price of 62 per cent iron-content ore delivered to Tianjin port jumped 5.4 percent to USD 118.20 a metric ton yesterday, according to prices from The Steel Index. That's the highest this year and the biggest one-day gain since July 10. Cash prices have more than doubled from their 2009 low in March because of demand from steel mills in China, the biggest user, that's prompted brokers to raise contract price forecasts and India to impose a duty on its ore exports to boost domestic supply. Vale SA, the world's largest producer, said this month it may delay starting contract talks until early next year. "It's perfect timing for the producers, they must be rubbing their hands" ANZ analyst Mark Pervan said. "The Chinese will be particularly annoyed because they were probably looking to negotiate early this year."

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Australia's third-biggest exporter, Perth-based Fortescue Metals Group, advanced 2 per cent to a four-month high of $4.44 at the close on the Australian stock exchange.

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BHP, the world's third-largest exporter of the ore, rose one per cent to $43.12.

Rio Tinto, the second-biggest, increased 0.3 per cent at $74.89.

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The cash price, which has jumped 19 percent in four weeks, is trading at 57 percent more than the current contract price, said ANZ's Pervan, who will be revising his own forecast to more than 30 percent from 20 percent. Iron-ore suppliers hold annual talks with steelmakers to fix contract prices for the 12 months from April 1, the start of the Japanese financial year.

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The four-decade-old annual iron ore pricing system was fractured this year after Chinese mills failed to reach agreement with the three largest suppliers, boosting demand for cargoes settled on the cash market.

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Producers earlier agreed to a 33 percent cut in contract prices with mills in Japan and Korea as worst global recession since World War 2 cut demand.

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Shipments from India, the world's third-largest exporter, may be at least 4.5 per cent below an earlier forecast after the government raised duties, the Federation of Indian Mineral Industries said yesterday. India said December 24 it had imposed a 5 percent duty on exports of iron-ore fines and doubled the tax on iron-ore lumps to 10 per cent. "There has always been that risk that India was going to start to try secure more of its domestic supply," ANZ's Pervan said. "The market is expecting a pull-back in Indian exports. Really at the end of the day iron ore is a location story. If you can't get it from the closest source which is India, you get it from the second-closest source, which is primarily Australia."

Rio Tinto said this month it had agreed to sell ore to India's Essar Steel for the first time. India, traditionally an iron ore exporter to China, plans to spend $8.95 billion in the year ending March 31 to improve infrastructure and boost economic growth. The global trade is worth about $160 billion a year.

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The China Iron & Steel Association said there was a "large degree of difficulty" in the annual talks as producers are seeking a 20 per cent to 30 percent increase, Dow Jones reported yesterday, citing the China Securities Journal.

Rio Tinto this month appointed a new chief negotiator with Asian steelmakers after four of its executives were detained by China in July.

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China may import 70 per cent of its iron ore needs this year, up from 50 percent last year, Baosteel's Chairman Xu Lejiang said Dec. 3. Imports rose 12 percent last month as steelmakers boosted output to meet demand from makers of cars and appliances.

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Analysts at Macquarie Group and JPMorgan Chase this month raised forecasts for annual contract prices after a surge in Chinese demand.

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Macquarie estimates prices may rise 30 percent while JPMorgan joined UBS and Goldman Sachs JBWere in predicting a 20 per cent gain.

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Steelmakers and steel exchange traded funds (ETFs) are girding themselves for a prosperous 2010 after a prominent analyst forecast higher prices for the metal. Following close behind could be coal prices, which are predicted to surge 30% next year.

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Recent price hikes for steel from several U.S. steelmakers has put the pressure on for higher steel prices early on next year. First quarter domestic steel prices are anticipated to go up as the pickup in demand will result from a recovery within the sector. Reuters reports that inventories at the mill, distributor and consumer level often provide a cushion against demand swings.

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The cost of producing steel is certainly rising. According to The Hindu Business Line, the iron ore prices, which have seen a surge since the lows of June of about $50-60, are now trading at around $90-100 range, while coking coal prices saw lows of around $120 are now trading at around $170.

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Both of these are used to produce steel. [Coal prices are fluctuating.]

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Analysts expect iron ore and coal prices to rise by as much as 30% in 2010 and steel prices are expected to follow suit.

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Market Vectors Steel (NYSEArca: SLX): up 111.3% year-to-date

Market Vectors Coal (NYSEArca: KOL): up 144.5% year-to-date

PowerShares Global Coal (NYSEArca: PKOL): up 135.6% year-to-date