PRICING NOTICE: New 62% Fe iron ore fines index proposal update

Following the stated one-month consultation period, Metal Bulletin is implementing a number of changes to the specifications initially proposed for its new 62% Fe iron ore fines index.

The new index was proposed in response to market demand for increased transparency around the price level that ore with lower alumina content than is reflected by the existing MBIOI-62 achieves in the spot market. There are also a number of other specification differences between the MBIOI-62 and the new proposed price, such as their respective silica and phosphorous base levels.

The recent increase in the market’s price sensitivity to alumina in particular has led to a significant divergence in spot price levels for a number of prominent iron ore products according to their gangue chemistry.

Feedback from market participants during the consultation period that began on July 24 primarily concerned the Brazilian-origin restriction that was originally proposed. Metal Bulletin has decided to lift the proposed origin restriction – material meeting the specification requirements will now be eligible for inclusion in the index regardless of origin. The new price will be known as the MBIOI-62-LA, in which ‘LA’ stands for ‘Low Alumina’. This is in response to feedback from market participants suggesting a key distinguishing feature of the index relative to the existing MBIOI-62 benchmark is its 0.5% lower alumina base specification.

In another move to increase the range of iron ore products that could fall within the index specifications, Metal Bulletin has decided to increase the maximum permitted Fe percentage from 63.0% to 63.5% and the phosphorous maximum from 0.08% to 0.09%. All eligible spot trade data that falls within the index specification ranges will be normalized back to the base specification using Metal Bulletin’s normalization models, which are based on regression analysis of previous transaction data and are updated monthly.

As originally proposed, the MBIOI-62-LA will follow the same methodology as Metal Bulletin’s other iron ore indices, but will not include separate sub indices for producers, consumers and traders. Internal calculation of a historical series for this index shows the vast majority of eligible transactions for this index occur on transparent platform basis, and are therefore not deemed to pertain to any particular market segment.

The full specification for this index, which will be launched on Monday August 27, now stands as follows:

Description: MBIOI-62-LA
Price: US$ per dry metric tonne, CFR China
Material Origin: All Origins
Fe Content: Base 62.0%, Range 61.0% to 63.5%
Silica: Base 5.0%, Maximum 7.0%
Alumina: Base 1.5%, Maximum 1.9%
Phosphorus: Base 0.08%, Maximum 0.09%
Moisture: Base 9.0%, Maximum 10.0%
Granularity: >90% <10.0mm, at least 35% >1.0mm, at most 45% <0.15mm
Trade Size: Minimum 30,000 tonnes
Payment Terms: Payment at sight, other terms normalised to base
Delivery Port: Base Qingdao, normalized for any Chinese mainland sea port
Delivery period: Within 10 weeks
Publication: Daily at 6.30pm Singapore time

To provide feedback on this index or if you would like to provide price information by becoming a data submitter to this index, contact Peter Hannah by email at: pricing@metalbulletin.com. Please add the subject heading FAO: Peter Hannah, re: MBIOI-62-LA

To see all Metal Bulletin’s pricing methodology and specification documents go to: www.metalbulletin.com/prices/pricing-methodology.

To see all Metal Bulletin’s index methodology and specification documents go to: https://www.metalbulletin.com/mb-index.html.

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