Bulk markets to continue to globalise. One of the impacts of an increasing trade in a commodity is homogenization of regional prices due to additional demand sinks and supply sources. This has become manifest in changes in the price discovery mechanism for both coal and iron ore - a process that is still ongoing.

Higher average achieved prices likely for producers.
We expect higher average achieved prices through two mechanisms 1) We would expect steady state benchmark and spot based pricing to ultimately be the same; however during periods of shortage and price spikes, spot based pricing should enable the miners to get better advantage from the rises. 2) Increased access to the international market is likely to enable producers to more readily achieve international price parity (or at least closer to it) on domestic product.

New supply markets opening.
Higher achieved prices offer the potential for a number of supply basins to supply more readily into the global market. The US, Russia and Central Europe are potential examples of this.

Supply risk to the downside means bulk pricing could remain elevated for longer.
Total export capacity for thermal coal and iron ore over the next three years is planned to increase by 147mt and
285mtpa, respectively, which would meet our estimated iron ore demand increase but not quite thermal coal expectations at that time. However, planned export increases have fallen short by anything up to 50% over the last few years and we see no reason why planned expansions should now have a better chance of being delivered on time. The market continues to look tight.

Eoin Treacy's view Bulk commodities offer perhaps the greatest leverage to the secular global infrastructure development theme since they are the basic materials required for such expansion. The sector is dominated by a comparatively small number of companies from an even smaller number of countries. We have written at length about the major diversified miners with a stranglehold on the iron-ore market and I reviewed a number of coal companies on October 12th. This report mentions a number of additional companies which have appeared less often in Comment of the Day, not least the minor iron-ore producers so I thought this might be a suitable time to review some of these shares.

Fortescue Metals first came to our attention following a discussion with some well informed Australian delegates at The Chart Seminar in 2007. The share moved from relative obscurity in 2005 to a peak in 2008 of more than A$12, only to relinquish the entire advance by early 2009. A chunky investment by the Chinese has fostered a recovery and the share has more than tripled over the last two years. It broke upwards to new recovery highs three weeks ago and while a little overbought in the very short-term a sustained move below A$5 would be required to question medium-term uptrend potential.

Kumba Iron Ore consolidated in the region of the 2008 high for much of the year but broke upwards to new highs last week and a sustained move below ZAR35,000 would be required to question medium-term upside potential.

FerrExpo has plotted a progression of higher major reaction lows since late 2008 and this was sustained following the sharp pullback from the April high. A sustained move below 280p would be required to question medium-term upside potential.

Cliffs Natural Resources had become quite overextended when it peaked in April and pulled back sharply to test the 200-day MA. It has been ranging with an upward bias, mostly above $60, since August and a sustained move below $58 would be required to limit scope for further higher to lateral ranging.

MMX pulled back sharply from the February high to test the 200-day MA. It has plotted a progression of higher reaction lows since May and a sustained move below BRL12 would be required to question potential for a successful move to new recovery highs.

Sesa Goa hit a medium peak in April and has been ranging below INR400 since. It needs to sustain a move above that level to indicate demand is regaining the upper hand.