Pesquero- Thanks for your post. The most important thing you add to this board is the willingness to correct over speculation. You do that while at the same time reassuring everyone just how good this stock play is. You seem to know just where things will be in the long run.
Spot pricing is a good discussion to have. A 62% discount from spot seems too steep. At $180/dMT that's only $111.6. Bob is already getting more than that on the first shipment. My understanding is that the Platts' 62 percent iron ore index IODBZ00-PLT is already corrected (normalized) for 62% iron. Source below:
Contracted price is sold as cents per DMTU generally on a FOB basis with the big three. Dry means a certain percent of moisture acceptable to both parties or the standard...6-7%, if I remember. Anything higher and there will be deductions.
spot price is the spot price. It is higher than contracted because you are not obligated to buy any more than one. Taking your scenario of a CFR basis, 180 spot x .62= 111 which is lower than contracted price on FOB basis. IS Bob selling on FOB or CFR basis? Who's paying for the ship? FOB always gets a discount because the trader or buyer ( end user ) gets to take more risk of getting the ore to China and also there is the risk of seller not getting the ore to the port for loading. Time and risk cost money.
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