LEX Fortesc-who? With all eyes on the big three iron ore producers, few expected anyone outside the oligopoly to break the deadlock with China’s mills. Yet Fortescue Metals of Perth, ranked 59 places below Rio Tinto on the list of the world’s biggest materials companies by market capitalisation, has reached what it calls “a groundbreaking agreement” with Baosteel, the biggest steelmaker. Fortescue’s output in the six months to December will be sold at US$55.50 a tonne, about a 3 per cent discount on the price Rio, the world’s third-biggest producer by market cap, set in May with non-Chinese mills.
Whether the agreement will be copied by anyone else is beside the point: with Chinese spot prices at $110, there is every incentive for BHP and others to ignore it. More important is what it means for Fortescue, a six-year old company that has been shipping ore for a little over a year.
