Proximity premia and proximity fuses…

You don’t often (well , *I* don’t often) think about the distances involved, the money paid etc etc. Interesting…
Vale stakes out ore giants’ backyard
A fleet of ore carriers and a Malaysian hub are part of the Brazilian’s plan to erode the ‘proximity premium’ that benefits BHP and Rio, writes Ayesha de Kretser in the Fin, May 26 or 27 2011…

Once the Malaysian centre is completed in 2013, Vale will send ores from its high-quality Carajas mines and lower-quality Southern Systems mines for blending in Malaysia and then for sale to steel makers throughout South-East Asia and China.
“This is the Australians’ worst nightmare,” said a Shanghai-based industry analyst. “At the moment they get away with selling crap to China because people are also buying high-quality Brazilian stuff and blending it in the blast furnace.
“So the Brazilians reckon if they don’t sell China the high-quality stuff, the Australians will have to massively discount all that rubbish high-alumina, high-silica stuff because the Chinese can no longer wear the poor productivity without the nice Brazilian stuff.”
Vale executives have openly expressed contempt for BHP Billiton’s push to extract a “proximity premium” from Asian customers while being forced to discount Vale’s own higher-quality ores because of China’s unwillingness to pay more for it, particularly given the higher cost of freighting goods from Brazil.

Tags: Vale