The MBOI index price is quoted in metric ton and the CLF price is in short tons, in the US it is the norm, everywhere else it is metric. The metric ton is 9.8% heavier the price should show this differential. The other difference is the fe content. The MBOI index shows 2 bases spec with 2 prices: the 62% fe or CFR china and the 63.5% fe the Indian spec and price, I assume it is FOB seller. The index does not specify. The price difference is 10USD, or 1.5% more fe and the full cost of transportation and risks. The buzz on CLF is that the iron ore for the 2011 season is 140 USD/Tm, which is in line with the MBOI index price. The total CLF iron ore production is 28 million Ts per year. India imported 48 million Tm in January alone. CLF is in good position to get the price up, the alternative is a lot more. Also, is the full CLF production committed to a long term contract. I believe that MSB royalty will increase regardless. 2011 looks like a bunger year, we may not have such a good year for a while. MSB will double, hands down.
Today the MBOI index is up again, 191.70 USD/Tm CFR China or up $1. 01 from yesterday. According to the index, the consensus is that the price of iron ore is peaking. Although CLF price is much lower, the spot MBIO price should help the CLF price. China and India are the largest buyer of iron ore, still. The inflation is near term not negative. Long term, fall 2011 is a question mark. 2012 will see iron ore price tank substantially as inflation will temper iron ore buying. That is what I have been reading as of today.
Correct me if I'm wrong but doesn't CLF buy MSB iron ore under contract and isn't that contract @ $75/ton and doesn't that contract run until 2016 ? It seems that CLF blew away the profit estimates and one of the reasons is because they pay substantially less for their iron ore than everyone else.