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from Reuters Investigates:

No room at the Inn … but maybe a job in the Outback

By Rebekah Kebede

You wouldn't think you'd have to make hotel reservations months ahead of time in Karratha, a small, dusty town on the edge of the Outback  a 16-hour drive from  Perth, the nearest city. But with Australia’s commodities boom, Karratha is bursting at the seams and nowhere is it more apparent than when trying to find a place to stay.

(Above photo: A kangaroo stands atop iron ore rocks outside the remote outback town of Karattha in Western Australia. Reuters/Daniel Munoz)

 

About two weeks ahead of my trip up to Karratha, to do a special report on Australia's hunt for foreign labour, all hotel rooms within a 60-km radius were fully booked and after more than 20 calls, the travel agent was still coming up empty.

A few more desperate calls turned up a couple of rooms in a town called Roebourne, about 30 minutes away from Karratha at the Ieramugadu Inn, an old motel, which like many others in the area, had become worker accommodations as Karratha struggles to house the influx of labour into town. The bill came to over $200 a night—just shy of what it costs to book a room with a view of the Opera House in Sydney.  The amenities at the Ieramugadu were somewhat different: a complimentary can of bug repellent, tin-foil covered windows to keep out the light for those on night shift, and a view of a truck parking lot through a hole in the tin foil.

from Krishna Das:

ANALYSIS-Small ships to unlock rate boon for bulk owners

By Krishna N Das and Jonathan Saul

BANGALORE/LONDON, Feb 8 (Reuters) - Dry cargo shippers with smaller vessels are shifting to more-risk, more-reward spot markets, eyeing rising demand for sugar and grains -- commodities well suited to versatile supramax and handysize ships.

Ship owners generally prefer long-term charters in a weak market. The Baltic Dry Index <.BADI> o-year lows in recent weeks but confidence has been rocked by South Korean dry bulk group Korea Line Corp <005880.KS> filing for bankruptcy protection, highlighting the risk of charter-party defaults.

from Money on the markets:

ANALYSIS-Small ships to unlock rate boon for bulk owners

[CROSSPOST blog: 2049 post: 28]

Original Post Text:
By Krishna N Das and Jonathan Saul

   BANGALORE/LONDON, Feb 8 (Reuters) - Dry cargo shippers with smaller vessels are shifting to more-risk, more-reward spot markets, eyeing rising demand for sugar and grains -- commodities well suited to versatile supramax and handysize ships. 

    Ship owners generally prefer long-term charters in a weak market. The Baltic Dry Index <.BADI> has tumbled to around two-year lows in recent weeks but confidence has been rocked by South Korean dry bulk group Korea Line Corp <005880.KS> filing for bankruptcy protection, highlighting the risk of charter-party defaults.

from DealZone:

Deals wrap: Battle in the Arctic

A woman pushes a baby pram while walking along a dirt road at dusk in Iqaluit, Nunavut on Baffin Island in the Canadian Arctic August 16, 2009. REUTERS/Andy Clark Nunavut Iron Ore sweetened its hostile bid for control of Baffinland Iron Mines, extending a battle with steel giant ArcelorMittal for a vast iron ore deposit in the Canadian Arctic.

Groupon, the social buying site that spurned a $6 billion takeover bid from Google earlier this month, has attracted several big institutional investors, writes NYT's Evelyn M. Rusli.

from Afghan Journal:

Afghan mining roadshow opens; temptation, trepidation for India, China

AFGHANISTAN/

Afghan authorities have organised a roadshow in London that opens on Friday aimed at drumming up interest in the country's mineral wealth variously estimated at anything from $1 trillion to $3 trillion.

India and China, the regional heavyweights, are the top candidates to fight for a piece of the action in their immediate neighbourhood. If there are such large reserves of copper, iron ore and key industrial metals such as lithium lying untapped in their neighbourhood you would expect them to invest heavily in Afghanistan to feed their supercharged economies.

from Financial Regulatory Forum:

COLUMN – Iron ore concentration raises valid concerns: John Kemp

By John Kemp

LONDON, April 7 (Reuters) - In a new twist to the iron ore saga, Brazil's giant iron ore producer Vale has launched a blistering counter-attack on European steelmakers, accusing them of coordinating their approach to ore negotiations in a manner that would raise issues under European competition law.

The accusations are contained in a letter to the European Commission, details of which have been released on the company's website.

from Commentaries:

Tough talking for Rio on China iron ore

CHINA-IRONORE/No great surprise that Rio Tinto has acknowledged it has given up trying to fix an annual iron ore price with Chinese steel mills.

What strains credibility is the miner's insistence that this has nothing to do with the detention of its negotiating team in China.

from DealZone:

China’s Iron Ire

Chinese demand for industrial commodities has long been the defining variable in establishing global market prices for everything from alumina to zinc. The modern engine of global manufacturing has made great strides toward embracing freer markets, but its deep roots in its command economy have clouded global markets' ability to gauge demand. If Chinese allegations are true that Rio Tinto spied and adopted such unsavory tactics as bribery to gather market intelligence, the actions of the western company could be considered an attempt to attune its business practices to the local climate.

Share of Rio Tinto were sagging on Monday after China stepped up its spying allegations. China's state secrets agency said on its website over the weekend that Rio Tinto had spied on Chinese steel mills for six years, resulting in the mills overpaying $102 billion for iron ore, Rio Tinto's biggest earner. Australia's Foreign Ministry says there's nothing new in the latest allegations. Rio declined to comment on the accusations, which followed China's detention a month ago of four Rio employees in Shanghai, including Australian Stern Hu, on suspicion of stealing state secrets.

from Commentaries:

Anglo dresses interims up as a defence

    Anglo American hasn't yet received a formal bid from Xstrata. But the miner's interim results read very much like a defence document.CHILE-CODELCO/ANGLOAMERICAN
    The highlights alone give a pretty good idea of what chief executive Cynthia Carroll and new chairman John Parker will focus on if Xstrata does eventually pounce.
    Anglo's case hinges on four things.
    First, that its plan to cut $2 billion of costs by 2011 is ahead of target. Second, that it is getting on top of its $11 billion net debt, and third, that progress is being made in restructuring its problem child Anglo Platinum <AMSJ.J>. Lastly, Anglo acknowledges that it is an objective to reinstate the dividend.
    Added to these elements, lest they appeared to have too defensive a flavour, is the promise of growth, largely through its Minas-Rio iron ore project in Brazil and its Los Bronces copper development.
    Of these, cost savings are a crucial point of contention in the Xstrata debate, with the rival miner's chief executive Mick Davis confident he can squeeze a further $1 billion out of a combination with Anglo, taking the total to $3 billion.
    Anglo isn't making any promises beyond those already given but the tone of the language -- which includes talk of being ahead on "asset optimisation", procurement and job reductions -- hints that it may be able to find more savings on its own, without handing anything to Xstrata.
    So far the market seems largely happy to let Carroll stick to her plan -- highlighting Anglo's leading position in platinum, diamonds and iron ore alongside its cost cutting success. But investors might ask more searching questions in the event that Xstrata did come back offering a premium.

from Commentaries:

Rio crisis rooted in marketing strategy

-- John Kemp is a Reuters columnist. The opinions expressed are his own --
  
   By John Kemp
   LONDON, July 10 (Reuters) - China's detention of four Rio Tinto <RIO.AX><RIO.L> staff marks the final phase in the long downward spiral of relations with Rio and BHP Billiton,  <BHP.AX><BLT.L> Australia's two major exporters of iron ore. While the arrests were unanticipated, the seeds of this crisis were planted long ago with changes in the miners' strategy.  The end result will be to accelerate a shift towards using the spot market -- rather than raw negotiating muscle -- to set prices.
   Perhaps the most important transformation in the mining industry over the last ten years has been a generational shift at the top of the major companies. The mining engineers who traditionally dominated the top ranks have been replaced by MBA-trained financiers. The engineers' traditional focus on output maximisation, process optimisation and cost reduction has been supplemented by a new emphasis on prices, profits and marketing.
   Mining firms have made major investments in market research and demand forecasting, as well as building up powerful marketing and negotiating teams. The overall objective is to plan and sequence new investment in capacity, as well as adjusting production from existing mines, to match supply with demand more or less continuously over the business cycle -- avoiding the destabilising build up and run down of inventories that previously led to massive price swings.
   The miners' ultimate goal is to reduce volatility and hold prices at a higher average level over the business cycle -- maximising shareholder returns in an industry that was notorious for destroying value.
   MARKETING AND COMMERCIAL INFORMATION
   The best way to think of Rio Tinto, BHP and some of the other majors is not as mining companies but as trading and marketing firms that have mining assets attached. The transformation has had two consequences:
   (1) As traders rather than miners, the firms have counterparties rather than customers. The producer-consumer relationship based on mutual advantage and creating shared value has been replaced by a trading mentality that sees deals as one-off transactions and conflicts over the allocation of value. All is fair in love, war and trading. Both the major Australian companies are perceived in the market as increasingly aggressive negotiators -- breeding considerable resentment among customers, not least China's steelmakers.
   (2) Both firms have invested heavily in market research and commercial information gathering to understand their customers' requirements -- and maximise the amount of value they can extract from negotiations.
   But the development of extensive market research and commercial information teams, allied to a tough negotiating approach, appears to have led to the current problems. There is a fine line between legitimate information gathering and more controversial activities -- and the division varies between countries and over time. Disputes that are a matter of civil law in one jurisdiction may be treated as a criminal matter in another.
   China has a particularly expansive notion of what constitutes a state secret and a broadly defined espionage law. But it is not the only one. Switzerland and other OECD countries also have statutes criminalising economic espionage or breaches of confidence.
   At the same time as detaining the Rio staff, China has arrested Tan Yixin, the head of iron ore imports for state-owned steelmaker Shougang for "revealing China's negotiating strategy" -- in effect "China's bottom line". <For related news click [ID:nPEK191335]>.
   It is easy to see how the situation in China has become so tense -- especially as relations between China's steelmakers and parts of the Chinese government, on one side, and Australia and the major mining companies on the other, have become so strained. With so much ill-will around, even a misunderstanding can escalate rapidly.
  
   DOWNWARD SPIRAL IN RELATIONS
   The detentions are simply the final phase in the downward spiral of relations. Conflict has been rising for five years as China's expanding steel industry and booming demand for imported iron ore has handed all the negotiating leverage to Australia's two major ore exporters and sent prices soaring.
   China responded to what it saw as the oligopolistic pricing power of the Big Three iron ore companies (BHP, Rio and Brazil's Vale <VALE5.SA>) by organising its own coordinated buyers' cartel under the auspices of the China Iron and Steel Association (CISA). The objective was to present a united front in the annual benchmark negotiations.
   But these efforts have been undermined by the activities of small speculative ore importers. As each year's negotiations have dragged on, speculative imports have surged, driving up spot ore prices and strengthening the hand of Australia's miners.
   Tensions first broke into the open in 2006, when China's Ministry of Commerce sent a secret letter to the country's customs inspectors asking them to scrutinise ore shipments for conformity with the bills of lading and import declarations -- paying particular attention to shipments originating from Rio and BHP. In effect, the ministry was trying to restrict speculative imports in a bid to strengthen the steelmakers' hands.
   When the letter leaked, it triggered a diplomatic incident. The Australian government issued a strong protest and threatened to make a formal complaint to the World Trade Organisation (WTO), accusing China of discriminating against Australian exporters. The issue was subsequently smoothed over as a misunderstanding.
   But simmering tensions burst out again when Chinalco's [ALUMI.UL] recent attempt to increase its holding in Rio provoked a nationalist backlash in Australia in favour of an "all-Australian" tie up with BHP designed more or less explicitly to preserve the companies' "pricing power". While both sides have subsequently tried to downplay nationalist aspects of the deal's collapse, it has added to the legacy of distrust and bitterness.
  
   END OF THE BENCHMARK SYSTEM
   Each year annual benchmark pricing negotiations have become more protracted. This year both the soft deadline of April 1 and the hard deadline of June 30 have passed without agreement. Rio has threatened to shift pricing to the spot market.
   In effect, Australia's mining companies have suffered a complete breakdown in constructive relations with their most important customer. China still needs the ore, and the mining companies still need to sell it. But the benchmark system may have broken down irretrievably; it is hard to see how negotiations can continue in their present format when some of the negotiators have been arrested.
   The current crisis will probably accelerate the shift to a spot market pricing system. Spot prices could be presented as the outcome of "market forces" rather than raw negotiating muscle, drawing some of the political heat out of the issue.
   The crisis could also create a greater role for merchants and independent traders to act as intermediaries. BHP and Rio have spent years trying to squeeze merchants out of many of the markets in which they operate to build stronger direct relationships with end users. But the escalating conflict may force an about-turn.
For previous columns, Reuters customers can click on [KEMP/] --
(Editing by Martin Langfield )

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