Iron Ore Price Discovery
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Francis Browne, 19th March 2013
16th Global iron & steel forecast, Perth
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Just to remind you…
Platts is a specialist energy market news and price publisher founded by Warren Platt over 100 years ago
Price Reporting Assessments
Market Reports Breaking News
$
!
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Extensive Global Reach
In the last year we have increased to almost 1000 people and more offices
Mexico City
Boston
Hightstown Pittsburgh
São Paulo
a
Perth, Melbourne
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Published methodology
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An introduction to eWindow
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Price discovery process
Simple phone survey
Engagement
all day Bid
Offer
Normalised to a defined standard
Collect data, test levels publish ‘heards’
write/break stories, update inform
Publish market commentary
Deal
timestamp
End day assessment
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Price Methodology
Bid
Offer
A market assessment is an exclusive process... ...zeroing in on the tradable level
• Platts assesses transactable market levels • Deals, bids and offers • Transparency and consistency • Repeatability and incrementability • Verification procedures • Methodology and accuracy
Platts uses well-defined, open, and transparent methodology to deliver accurate and precise assessments
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http://www.platts.com/newsfeature/2012/metals/plattsironore/index
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Platform trade data
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Benchmarks evolve with greater transparency
Initial Stage
Direct trade customary
Phone surveys
Standardization of practices
Assessments daily
Market education process
Assessment windows
Participants named
Firm, open bids/offers
Price formation in real time
Intermediate Stage
Price range narrows
Brokers facilitate trade
Market activity in real time
Transparency increases
Advanced Stage
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Price Discovery – Market on Close
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Offers
Bids
Time stamped Cut-off for new bids/offers
Deals
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FeWindow – launch March 22, 2013
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e is for editorial
• Time stamped MOC • Bids and offers are published either directly by those
with participation agreements or by our editors • All participants have to be counterparty approved to
publish information • Transactions must be performed
Data collected meets our editorial standards
eWindow key points
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IODEX methodology Assessment remains the same
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Platts focus is the spot market �
Platts assessments
• Spot prices are established at the margin �
• Term contracts can be priced on Platts assessments
• Paper swaps prices also settle off spot prices
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Benchmarking is about defining consistent standards
X X Assessment specifications
Time of trade �
Delivery timing�
Quality
Volume �
Location
Terms of trade
Credit & risk
Normalization: the art and science of converting all the dimensions of each unique transactions to a common standard, for price comparison.
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Delivery into the spot market
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1% Fe differential Valuing a unit of iron in the spot market
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1% Fe diff versus dmtu
1% Fe diff
62% dmtu
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IODEX CFR versus 1% differential
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Furnace Economics (Fe) Steelmakers seek flexibility
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Spread 65% vs IODEX has been reducing
Source: Platts
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Same spread monthly – less noisy
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All grades spreads have converged
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IODEX 62%
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Steel Mill Economics
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IODEX correlates with Tangshan Billets
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