Conflict Resolution – The Wrong Way

About two weeks ago Fortescue Metals Group (“FMG”) announced “… that consistent with the continued prudent management of its business and in reflection of changed operating conditions, it has exercised suspension of all of its long-term CFR shipping Contracts of Affreightment and Consecutive Voyage Contracts on the basis of unforeseen circumstances.”

As a consequence of this decision, volumes of product shipped will remain unchanged. The change will be between the split of sales on FOB and CFR terms. CFR sales are where FMG supplies the product on a landed basis into China where FOB sales are where the customer arranges its own freight from Port Hedland to China. Approximately, two thirds of current sales have been on CFR terms but this is likely to reduce to one third of

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