Quiet amusement as Chinese steel mills ask for help from Rio and BHP

There would be an element of schadenfreude within BHP as China’s steel mills send signals of distress in response to the soaring price of iron ore.

BHP is the world’s biggest seaborne metallurgical coal producer but China’s so-far-unofficial ban on Australian coal has left Australian coal carriers stranded in China’s ports, unable to unload and the price of Australian coal has plummeted.

No doubt, when BHP iron ore marketing executives were summoned to a video call with the China Iron and Steel Association last week, they made the right sympathetic noises about the near-70 per cent increase in iron ore prices this year but, given the backdrop of the widespread Chinese trade sanctions on Australian products and on their own coal exports, one suspects it wouldn’t have been heartfelt.

It isn’t clear what CISA expects the Australian producers to do about prices that have soared from less than $US90 a tonne at the start of this year to more than $US150 a tonne, which has more than offset the impact of the bans on coal, barley, wine, lobsters and lamb on Australia’s exports to China.

There was a ripple of concern, and some bemusement, in mining circles when CISA, according to Reuters, said on Wednesday that Rio Tinto, similarly summoned to talks, had committed to working with the mills to review the pricing mechanism for iron ore, which CISA vice-chairman Luo Tiejun described as “unreasonable” and “not conducive to the long term healthy development of upstream and downstream” sectors of the industry.

Rio responded to the report by issuing its own very diplomatic, but rather meaningless, statement.

“Rio Tinto is continuously working with customers, suppliers and industry stakeholders to improve our products and services to meet evolving customer needs as well as to ensure major markets, including iron ore, are open, liquid and transparent, which benefits all market participants,” it said.

It is understandable that the mills aren’t happy with the spike in prices even as their other big input cost – coal – has soared as a result of their own government’s actions in cutting off their supplies of Australian coal.

They are having to substitute domestic coal and coal sourced from other countries that is nearly twice as expensive and of lower quality than the Australian product. With the elevated iron ore prices they are experiencing an intense margin squeeze. Trade wars, as the US discovered, are mutually destructive.

While the iron ore producers might make polite motherhood statements of their commitment to their customers and to liquid and transparent markets – and the iron or market, where the price is based on indices that reflect actual customer transactions, is transparent and illiquid – there is no way, given their historical experiences, that the Australian miners would contemplate any material change to the way their commodity is priced.

The producers aren’t going to walk away from the current pricing mechanism or gift the mills material discounts to alleviate the pressure on the mills’ margins created by the effects of the stimulus program and China’s self-harming ban on Australian coal.

Until a decade ago seaborne iron ore had been priced through annual negotiations between the big producers – Rio, BHP and Brazil’s Vale – and the Chinese mills, echoing the way the price had been set with Japan’s mills for more than 40 years.

It was former BHP chief executive, Marius Kloppers, who transformed the way iron ore was priced.

From about 2005, Kloppers had advocated a shift to market-clearing prices for bulk commodities like coal and iron ore to replace the annual, protracted, negotiations with the Japanese and Chinese mills, where the producers were inevitably played off against each other.

He said BHP would produce at capacity and accept whatever the market price – at the time indices of iron ore prices were just emerging - might be. In 2010 BHP shifted most of its Chinese customers over to market pricing.

Rio and Vale were initially reluctant to follow suit but the Chinese mills forced their hand. Where the Japanese had always honoured their contracts the Chinese mills, when the spot price fell below their contract price, reneged on the contracts to get access to the lower prices.


Confronted with the “heads we win, tails you lose” stance of the mills, Vale and subsequently Rio joined BHP in adopting market-related pricing and the contract system disappeared.

Unless Rio’s corporate memory has completely failed, which it hasn’t, there will be no turning back and any changes to the current pricing mechanism will be tinkering rather than structural.

The problem confronting the mills is that the prices do reflect the fundamentals of supply and demand.

On the supply side – and the three Australia producers, Rio, BHP and Fortescue supply more than 60 per cent of the mill’s demand – there have been some constraints.

Vale is still recovering from its tailing dam failures and has also experienced weather events that have seen its production fall short of its own forecasts.

The Pilbara miners are implementing pre-cyclone season maintenance, which has a modest impact on their production volumes, but are otherwise producing as much ore as they can and, subject to the weather, will continue to do so.

The mills can blame their own government for the demand-side issues. China’s response to the pandemic centred on stimulating infrastructure investment, which is steel-intensive. The mills are producing at near-record rates - which means that their demand for iron ore is at near-record levels.

Given the stimulus-inflated demand, which has seen iron ore imports running at double–digit rates above those in 2019, along with Vale’s production shortfalls and thin inventories at the ports, it isn’t surprising that the price has spiked.

That’s the way markets work. The mills didn’t complain – and nor did the miners -- when, in 2016, the price fell below $US40 a tonne as supply overwhelmed demand.

While there is speculative activity in iron ore, via trading in iron ore futures on the Dalian and Singapore exchanges, the prices the miners are receiving are not unprecedented.

During the last, and far bigger, bout of infrastructure-based stimulus in response to the financial crisis the price neared $US200 a tonne.

Contrary to the mills assertion, the pricing mechanism hasn’t failed but reflects actual market conditions and CISA’s calls for China’s regulators to investigate the price and “severely crack down on possible violations of laws and regulations” are therefore misconceived and could backfire.

The producers aren’t going to walk away from the current pricing mechanism or gift the mills material discounts to alleviate the pressure on the mills’ margins created by the effects of the stimulus program and China’s self-harming ban on Australian coal.

Any attempt to “crack down” on them could adversely impact supply, send the price roaring even higher and ravage the mills’ profitability even further.

https://www.smh.com.au/business/markets/schadenfreude-as-chinese-steel-mills-ask-for-help-from-rio-and-bhp-20201217-p56oa6.html

So now we can’t even talk transgender issues?

The Melbourne Age ran an opinion piece on its website Sunday in which a mum expressed reservations about her daughter’s desire for a sex change.

But less than an hour after trans activist and La Trobe University lecturer Yves Rees complained that the paper was “peddling transphobic nonsense” — by which she meant a parent’s sincere concerns for her child –- the paper issued a public apology and promised to delete the piece.

Age editor Gay Alcorn wrote: “I apologise Yves … given the sensitivity in Melbourne due to the recent death of a young trans woman, I am having it removed from our site.”

And just like that, The Age newspaper, aping Pravda, disappeared the viewpoint of a caring parent for ideological reasons.

One wonders if The Age will now submit all its content to the LGBTQ crowd for approval before publication.

What is the point of a free press if it makes itself subservient to the heckler’s veto?

The “transphobic nonsense” that Yves Rees found so offensive was a mum expressing concern that health professionals seemed too ready to affirm her teenager’s claim to be transgendered.

The mum, who had consented to testosterone treatment for her daughter, wrote that she worried about “a relentless motion towards permanent medical changes” when it was unclear to her whether the child might change her mind about changing her sex.

A posse of hysterical rainbow bullies took to Twitter to deride the mum as being nasty, vindictive, hateful and harmful. Her article was “crappy writing by a crappy parent,” they said, outraged that she had referred to her daughter as “she”.

“Anyone who misgenders their own child should have them removed from their care,” thundered one activist.

Well if a parent can’t express doubt about their child embarking on a series of body-altering treatments that are in many cases irreversible, when in all other areas that same child is not granted the capability to consent, then children may as well be wards of the state.

ABC radio presenter Patricia Karvelas called the article a “truly bewildering piece”.

“My god … I imagine this is what parents were writing about gay kids once,” she said, forgetting that if your “gay kid” later decides he is not gay, no harm done. But if your trans kid later decides he is not trans, well good luck unscrambling that egg.

Alcorn’s decision to vanish a woman’s honest account of her experience trying to find appropriate treatment for her daughter’s dysphoria did not save her from the mad ravings of the sex-change-happy Twitter mob.

They insisted that such articles might lead trans people to commit suicide. They were outraged that it had been published so soon after the body of a missing trans woman was found in bushland in East Kew. Police have said they were not treating her death as suspicious.

“Cancelling my subscription to The Age. Absolutely vile to publish this hateful crap at any time, let alone today,” tweeted one unhappy reader.

“It’s repugnant opinion like this that drives trans people to kill themselves,” warned another.

“The recent passing of this human being can, in part, be attributed to irresponsible ‘journalism’ like this. Never ever post transphobic shit again, blood is on your hands.”

All of which begged the question, if the risk of trans people committing suicide is increased by the publication of a mum’s concern that her teenager might have misdiagnosed herself as trans, isn’t that evidence of deeper issues being experienced by those at risk?

Or is it a manipulative cry-bully tactic aimed at silencing any dissent from the ‘gender is fluid’, ‘trans women are women’ and ‘gender is a social construct’ narrative?

Surely a recent High Court ruling in the UK which found that puberty blocker drugs given to stop the natural development of transgender identifying children were “experimental” and weak on evidence proves confused teenagers and their parents need discussion, not censorship from journalists who are terrified by ideas and determined to play to the sensibilities of micro-groups.

Hysterical outrage from activists claiming that an op-ed is “dangerous and harmful” ignores the fact that medical interventions involving children can likewise be “dangerous and harmful.”

The article published in and then quickly removed from The Age was fair comment on an important issue of national interest. It’s a conversation that should be had. All sides deserve to be heard. Children’s lives are at stake.

https://www.spectator.com.au/2020/12/so-now-we-cant-even-talk-transgender-issues/

Dunce teachers to be weeded out with tough test

It is certainly a good idea to filter out the dummies BEFORE they do teacher training rather than after.  It avoids big waste of resources.