Published on March 11, 2014
© 2013 Platts, McGraw Hill Financial. All rights reserved. Floating prices in the seaborne market Francis Browne, Editorial Director, Price Group Global Iron ore & Steel forecast, Perth, 11 March, 2014
Agenda • Pricing mechanisms • Trade volume • Size matters; pellets, lump and premiums • Methodology update 2
Introducing Platts • Founded in 1909, Platts is the world’s largest energy and metals information provider • Every day, more than US$10 billion in trading activity and term contract sales are based on Platts • Platts brings transparency to the market 3 Price Reporting$ Breaking News! Assessments Market Reports
Platts Global Positioning • More than 1000 professionals across 20 offices • Over 10,000 customers in over 150 countries 4 Singapore Beijing Shanghai Hong Kong Tokyo Melbourne London Moscow Dubai Sao Paulo Buenos Aires New York Washington Houston Pittsburgh Boston Denver Evergreen Hightstown Westminster
Platts Focus: The Spot Market • Spot prices are established at the margin • Term contracts are priced on spot market assessments • Derivatives settle off spot prices 5 Platts assessments
Pricing mechanisms Iron ore trade continues to evolve
IODEX 62% CFR China is Now a Global Benchmark 7
There is no universal price mechanism • All mechanisms now use a published base price • Many LTC’s are now priced monthly with a provisional value before shipment • Growing portion have migrated to floating prices • Shorter term pricing has led to better contract performance 8
Floating contract pricing 9 • Most floating prices are basis an index value +/- a delta • Typically they price a quotation period (QP) against the average of an index over a specified period. • Usually that period is a month, it could also be loading dates either side of a B/L date or NOR dates
What do Price Differentials Express? • Why does the market apply premiums or discounts to published benchmark prices? – Quality differences (Chemical, Physical, Metallurgical) – Locational differences – Terms and conditions differences – Most importantly; timing differences 10
Typical examples or floating price quotes • Month average plus/minus delta in $/mt – Month QP +2 – Month QP -2% +3 • Notice of readiness (NOR) or B/L date – NOR +/-5(days) -2 – B/L +/5 +VIU +3 • Periods around shipping dates are often the average of index, 2 days prior - B/L date - 2 days post. So called 2-1-2 11
• Spot deals on index-linked basis have increased also as participants seek to mitigate price volatility • Differentials to the published value used as expressions of differences in quality/VIU and timing • Trend mirrors evolution in other cargo markets like oil, in which a large portion of spot transactions are index-linked • Market participants buy or sell physical on a floating basis, and hedge their exposure in derivatives on a fixed-price basis 12 Emergence of Floating Price Activity in Spot Market
Floating Price Activity in Spot Trading – Examples 13 Differential expression Actual examples Product Pricing basis Quotation period Flat price 61%-Fe Pilbara Blend Fines 62%-Fe IODEX +$1/dmt Month of BL 63%-Fe Standard Sinter Feed Guaiba (SSFG) Platts IODEX + 1%-Fe differential +$0/dmt 5 days before and after NOR (discharge port), excl. NOR date 61.8%-Fe Brazilian fines with 7.4% SiO2 IODEX +flat-price discount per 1% silica exceeding 4.5% (bidder seeking smallest discount quantum wins cargo) 10 days before and after BL 63%-Fe Newman Lump IODEX +$0.16/dmtu Month of delivery 58%-Fe Indian fines Platts 58%-Fe +$0/dmt minus Freight 5 days on and after offer date Percentage 57%-Fe Super Special Fines dmtu value of 62%-Fe IODEX -3% 5 days on and before NOR (discharge port)
Trade volume Spot market activity
Observed trades Jan 13 – Jan14 15
2012 delivery 16
2013 delivery 17
Spot market transactions • In 2013, Platts observed 475 trades • 8% of the total seaborne volume China imported that year. • In line with our view that most spot markets are around 5-10% of delivered volume • LTC performance is good when there is less price incentive to buy spot. 18
Long term average = $130 19
2013 Cal14 trade vs spot 20
2013 - Cal14 traded average $116.22 21
Volume of swaps cleared at SGX 22
DCE traded 470 million tons in 6 months • Open interest in currently 419,000 lots equivalent to 20 million tons • Pricing tracks offshore movements • Most active month has moved to September • Strong correlation with the SHFE rebar contract 23
Lump and pellet premiums Size matters
Lump assessments published in SMD 25
Pellet assessments 26
Pellet assessment formula • Previous months average netback • Pervious months average Fe differential (x3) • Market assessed premium (market assessed) • Factored to 65% to give a dmtu value 27
Methodology update Bringing more information and transparency
Launched a low Alumina 58%Fe assessment 29
Methodology guide 30
Dry bulk freight 31 • Thermal Coal freight prices • News on Freight, Rail and Ports • Current Vessel Fixtures • Sugar freight prices • Raw Material freight prices • News on Freight • Steel freight prices • Freight derivatives prices Thermal Coal Sugar, Polymers Iron Ore, Metallurgical Coal and Alumina Steel Dry Bulk Shipping Products Newsletter Real Time Market Data Analytics Trading Services • Polymer freight prices • Freight prices • Freight Fundamentals (fixtures, etc.) • Freight derivative prices • News on Freight
Thank you Always available to answer your questions
VITOGAZ vous présente: CFBP baromètre gpl carburant
Ata Escrita da 16ª Sessão Ordinária realizada em 16/10/2014 pela Câmara de Vereado...
Ata Escrita da 10ª Sessão Extraordinária realizada em 16/10/2014 pela Câmara de Ve...
Rx1 zayiflama hapi, kullanimi nasildir, yan etkileri var mi? yan etkiler var ise h...
Esposto del MoVimento 5 Stelle sul Patto del Nazareno
View Francis Browne’s professional profile on LinkedIn. LinkedIn is the world's largest business network, helping professionals like Francis Browne ...
Speaker's details. Editorial Director, Price Group, Gas & Power S&P Global Platts; Speaking at: SESSION 7 – PANEL DISCUSSION - LNG Trading Exchange Part 1
View the profiles of professionals named Francis Browne on LinkedIn. There are 16 professionals named Francis Browne, who use LinkedIn to exchange ...
email@example.com . firstname.lastname@example.org . Kenneth . Foo (coking coal and coke) ... Browne, Francis Company: McGraw Hill Properties ...
View Francis Browne's business profile as Editorial Director at Electrical World and see work history, affiliations and more.
Methodology and Specifications Guide TheMcGraw HillCompanies UPDATED: MARCH 2010 ... email@example.com. Tel: +44 (0) 20 7176 6239), or James
Platts is delighted to reveal that Steel Business Briefing’s 11th Annual Steel Markets Europe ... Francis Browne, ... June 1-2, 2015 – Barcelona ...
Platts Commodity Week – June 2 & 3. At Platts Commodity Week in Dubai, market participants from across the globe converged to hear our most experienced ...