Metal Bulletin To Offer Iron Ore Index On Daily Basis
May 18 2009 - 8:28PM
Dow Jones News
The Metal Bulletin Iron Ore Index will soon be offered on a
daily basis to give up-to-date benchmark prices for iron ore, in
response to booming volumes of iron ore traded on China's spot
market, the company said in a release dated Monday.
"The spot market into China for iron ore has rapidly matured and
has now become the market mechanism of choice for most industry
participants, superseding the benchmark system. China consumes
almost half of the world's output of iron ore, and is the only
significant spot market in the world," said MBIO Director Cameron
Hunt.
Metal Bulletin's daily index will provide an accurate and
up-to-date benchmark to clear iron ore swaps and physical pricing.
It will also still publish its weekly index.
"Metal Bulletin's methodology has proved itself in creating the
most accurate reflection of the physical spot market into China.
This is the only index with a methodology specifically designed to
minimize unfair market influence," said Hunt.
The announcement marks another step away from the traditional
benchmark system that up until now has been set annually following
often long and opaque talks between the three iron ore majors and
key consumers Japan and China.
This year in particular, BHP Billiton Ltd. (BHP), Comphania Vale
do Rio Doce (VALE) and Rio Tinto Ltd. (RTP) have stepped up spot
market sales as customers defer contracted shipments.
A settlement is often reached before the start of April, the
start of the Japanese financial year, though talks can drag on
longer. This year, negotiating parties still appear a long way from
forging an agreement, and some analysts have suggested the
benchmark system may end as early as the current round of
talks.
BHP Chief Executive Marius Kloppers at a recent conference said
the benchmark was "practically dead. Prices for this trade should
not be settled mysteriously in a dark, smoke-filled room
somewhere."
-By Elisabeth Behrmann, Dow Jones Newswires;
61-2-8272-4689 elisabeth.behrmann@dowjones.com