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Whats new?
This updated edition of Metal Bulletins Iron Ore Index Guide contains details on the upgrade of the 65% Fe
Brazilian Premium to a standalone index.
Since 1st September 2014, Metal Bulletin has directly replaced the premium with an index that represents the
total combined value of 65% Fe Brazilian material of the published specifications. This follows developments in
the spot market for similar material and market feedback. Further details on this are available on page 11.
Contents
Metal Bulletin Index Subscription Package
Introduction to Metal Bulletin Iron Ore Index Methodologies
Iron Ore Methodology Flow Diagram
MBIOI Usage Guide
Fines Indices- 62%, 58% and 58% Premium, CFR Qingdao
65% Fe Brazilian Fines, CFR Qingdao and 63% Fe Australian Lump Premium
MBIOI- 62 Historical Chart
65% Fe Blast Furnace Pellet and 66% Fe Concentrate Indices, CFR Qingdao
62% Fe China Port Stocks Index, RMB/WMT FOT
Chemistry adjustments - Fe and Si value-In-Use Indices
MBIOI Five-year report - Mining Five Years of Iron Ore Data
MBIOI Calendar and Price Consulting
Index calculation during periods of low liquidity
Frequenty Asked Questions
4
6
8
9
10
11
12
14
15
16
17
18
19
20
This document dated September 2014 supersedes all previous Metal Bulletin iron ore index
methodology documents. The most up-to-date methodology will always be available to
download at: www.mbioi.com
Metal Bulletin | 3
Metal Bulletin | 4
www.mbironoreindex.com
Daily alert direct to your inbox- latest iron ore news - spot market data - historical data
Subscribers to the Metal Bulletin Iron Ore Indices recieve a daily alert with all the latest index calculations direct to their inbox.
Access to all our prices is available online, including all historical data with latest prices available through the daily newsletter. The
website also provides the latest iron ore news and market developments.
Metal Bulletin | 5
NORMALISATION
Capturing Value-in-Use - The data is normalised using an
in-house developed model based on regression analysis of the
collected data points. The analysis allows Metal Bulletin to
capture the value-in-use applied by the market to different
materials, and normalise to a single specification.
Iron ore indices that are published daily have their
normalisation coefficients updated every month to reflect the
constantly changing value-in-use relationship of different
products and grades. Iron ore indices that are published weekly
have their normalisation coefficients updated every quarter.
Material that differs from the base specification but falls within
the target range is normalised to the base specification and
port. The base specification has been chosen in consultation
with the market to reflect the reality of the physical spot
market.
Payment terms - Payment terms are based on typical
commercial practice in the iron ore spot market. Transactions
that are conducted on different payment or credit terms can be
normalized back to the base specifications, taking into account
discounts, current interest rates and standard commercial
terms.
Material in different forms is excluded as appropriate from the
index in question. Domestic Chinese material, and material
imported by routes other than by sea, for example by train or
truck, is also excluded. Material that has been delivered and is
held on stockpile at the dock is also excluded except in the
China Port Stock Index.
MARKET REPRESENTATION
The Metal Bulletin Indices have been specifically constructed
to automatically exclude outliers and provide a fair market
representation through the three sub-indices.
Outliers - All data points that fall greater than 4% away from the
initial calculated index are excluded, and the index recalculated.
Outliers will be investigated, and attempts to unfairly influence
the index will result in the data provider being warned or
excluded.
Metal Bulletin reserves the right to see contracts and signed
paperwork before inclusion of the data in the calculation. If this
is refused then the data, or the data supplier, can be excluded
from the data collection process. Metal Bulletin reserves the
right to exclude data that is not fairly presented or is believed
may be an effort to distort the index.
If the material delivered is different to that expected at the
original transaction no changes will be made to the indices. The
spot price paid was for the expected material. Any changes
made in retrospect are between buyer and seller.
PUBLICATION
From 1st January 2014 the indices have been published daily at
7pm Singapore local time. They will not be published on
Singapore national holidays.
Singapore national holidays 2014* are as follows:
1st January 2014
31st January 2014
18th April 2014
28th July 2014
1st May 2014
6th October 2014
13th May 2014
22rd October 2014
25th December 2014
*source: www.mom.gov.sg
Where non-publishing holidays occur on a Friday, the weekly
indices will be published on the preceding working day and will
reflect price data from that weeks working days
Metal Bulletin has no financial interest in the level or direction
of the index.
Metal Bulletin | 7
Phone
Website
Chinese Data
One-way
Information flow
between Index
department and
editorial.
Metal Bulletin
Pilbara
Yandi
Metal
Bulletins
Calculated
Coefficients
Carajas
Other...
Normalisation procedure
India
Supramax Route
Three sub-indices;
each tonnage
weighted to
balance market.
Producers
Consumers
Metal Bulletin | 8
MBIO Index
MBIOI Website
www.mbioi.com
Reuters
Daily Email
Alert
Brazil
Capesize Route
Preliminary MBIO
Index Figure
Bloomberg
Traders
Australia
Capesize Route
Normalisation coefficients
based on value-in-use
curves are developed In
house. The coefficients are
created using the previous
months price data.
Metal Bulletin | 9
Index Specifications
MBIOI - 62
MBIOI - 58
Price
US$ per dry metric tonne, CFR China
Material Origin
All Origins
Fe Content
Base 62%, Range 56% to 66%
Silica
Base 3.5%, Maximum 8.0%
Alumina
Base 2.0%, Maximum 4.0%
Phosphorus
Base 0.05%, Maximum 0.15%
Sulphur
Base 0.02%, Maximum 0.06%
Loss on Ignition (%DW)
Base 4.7%, Maximum 9.8%
Moisture
Base 8.0%, Maximum 10.0%
Granularity
Base Size >90% < 6.3mm, at least 90% <10.0mm, at most 40%
<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 8 weeks
Publication
Daily at 7pm Singapore time
Price
US$ per dry metric tonne, CFR China
Material Origin
All Origins
Fe Content
Base 58%, Range 56% to 60%
Silica
Base 5.5%, Maximum 9.0%
Alumina
Base 3.5%, Maximum 5.0%
Phosphorus
Base 0.08%, Maximum 0.15%
Sulphur
Base 0.04%, Maximum 0.07%
Price
US$ per dry metric tonne, CFR China
Material Origin
All Origins
Fe Content
Base 58%
Silica
Base 5.5%
Alumina
Base 1.5%
Phosphorus
Base 0.05%
Sulphur
Base 0.01%
Moisture
Base 8.0%, Maximum 10.0%
Granularity
Base Size >90% < 6.3mm, at least 90% <10.0mm, at most 40%
<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 8 weeks
Publication
Daily at 7pm Singapore time
Moisture
Base 8.0%
Granularity
>90%<10.0mm
Metal Bulletin | 10
Trade Size
Minimum 30,000 tonnes
Payment Terms
Payment at sight
Delivery Port
Qingdao
Delivery period
Within 8 weeks
Publication
Daily at 7pm Singapore time
The Metal Bulletin Iron Ore Index Lump Premium reflects the
premium, in US/dry metric tonne units, which Australian origin lump
within the specifications defined below, commands on a spot basis
over the benchmark 62% Fe Fines Index (MBIOI-62).
Revised Price
This price, which was launched in January 2014, has been upgraded
from a premium to a standalone index. This follows developments in
the spot market for similar material and market feedback. Metal
Bulletin has also increased the Fe normalisation range to include
material that has between 63.5% Fe and 66.0% Fe. The base
specification of the price is unchanged.
MBIOI 65 - BZ
MBIOI - LP
Price
US$ per dry metric tonne, CFR China
Material Origin
Brazil
Fe Content
Base 65.0%, Range 63.5% to 66.0%
Silica
Base 2.7%, Maximum 3.7%
Alumina
Base 1.2%, Maximum 1.6%
Phosphorus
Base 0.045%, Maximum 0.060%
Sulphur
Base 0.01%, Maximum 0.05%
Moisture
Base 9.0%, Maximum 10.0%
Granularity
>90%<10.0mm, <40%<0.15mm
Price
US/dry metric tonne units (dmtu)
Material Origin
Australia
Fe Content
Base 63%, Range 61% to 65%
Silica
Base 3.5%, Maximum 5.0%
Alumina
Base 1.5%, Maximum 2.0%
Phosphorus
Base 0.08%, Maximum 0.10%
Sulphur
Base 0.02%, Maximum 0.04%
Loss on Ignition (%DW)
Base 5.0%
Moisture
Base 4.0%, Maximum 6.5%
Granularity
Max 13.5%<6.3mm Max 25%>31.5mm
Trade Size
Minimum 30,000 tonnes
Payment Terms
Payment at sight
Delivery Port
Qingdao
Delivery period
Within 10 weeks
Publication
Daily at 7pm Singapore time
Trade Size
Minimum 30,000 tonnes
Payment Terms
LC on sight, other terms normalised to base
Delivery Port
CFR Qingdao, normalized for any Chinese mainland sea port
Delivery period
Within 8 weeks
Publication
Daily at 7pm Singapore time
Since 1st September 2014, the price that previously represented the premium that 65% Fe
Brazilian Fines commanded over the benchmark 62% Fe Fines Index has been replaced by a
standalone index representing the specification above. The new reference price reflects the
total implied value of the product on a CFR Qingdao basis. The code for this price remains
MBIOI-65-BZ and acts as a direct replacement to the previous premium plus MBIOI-62.
Metal Bulletin | 11
6. Record high
$191.70/tonne, 17th February 2011
1. Index launched
23 May 2008, $180.52/tonne
180
160
5. Most consecutive da
14, 10th March 201029t
2010/ 31st October 2
November 2011
120
100
80
60
2. Record low
$58.67/tonne, 31st October 2008
40
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
ays of rises
th March
2011- 17th
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Index Specifications
MBIOI-PT
MBIOI-CO
Price
US$ per dry metric tonne, CFR China
Fe Content
Base 65%, Range 60% to 70%
Origins
All Origins
Silica
Base: 4.5%, Maximum: 6.0%
Alumina
Base: 0.4%, Maximum: 0.8%
Phosphorus
Base: 0.03%, Maximum: 0.05%
Sulphur
Base 0.01%, Maximum 0.02%
Moisture
Base 2.0%/DW, Max 3.0%/DW
Granularity
Maximum Size >90% >10.0mm
Compression Strength
Base 250daN, min 200daN
Trade Size
Minimum 10,000 tonnes
Payment Terms
LC on sight- other payment terms normalised
Delivery Port
Base Qingdao - normalized for any Chinese mainland sea port
Delivery
Seaborne Imports- within 8 weeks
Publication
Friday at 7pm Singapore time
Price
US$ per dry metric tonne, CFR China
Fe Content
Base 66%, Range 63% to 70%
Origins
All Origins
Silica
Base: 4.5%, Maximum: 9.0%
Alumina
Base: 0.5%, Maximum: 2.0%
Phosphorus
Base: 0.02%, Maximum: 0.06%
Sulphur
Base 0.03%, Maximum 0.10%
Titanium
Base 0.05%, Maximum 0.30%
Moisture
Base 8.0%/DW, Max 11.0%/DW
Granularity
Maximum Size >80% <0.15mm. Undersize maximum 20%<0.05mm
Trade Size
Minimum 10,000 tonnes
Payment Terms
LC on sight- other payment terms normalised
Delivery Port
Base Qingdao - normalized for any Chinese mainland sea port
Delivery
Seaborne Imports- within 8 weeks
Publication
Friday at 7pm Singapore time
Metal Bulletin | 14
The price is quoted in RMB per wet metric tonne, and includes 17%
VAT and port fees. The index is rounded to the nearest RMB.
MBIOI-CPS
Price
RMB per wet metric tonne, Free-on-truck
Fe Content
Base 62%, Range 56% to 66%
Origins
All Origins
Silica
Base 3.5%, Maximum 8.0%
Alumina
Base 2.0%, Maximum 4.0%
Phosphorus
Base 0.05%, Maximum 0.15%
Sulphur
Base 0.02%, Maximum 0.06%
Moisture
Base 8.0%, Maximum 10.0%
Granularity
Base Size >90% < 6.3mm, at least 90% <10.0mm, at most 40% <0.15mm
Trade Size
Minimum 500 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 two weeks
Publication
Daily at 7pm Singapore time
Metal Bulletin | 15
Chemistry adjustment
Value-in-Use Indices
MBIOI Value-In-Use Index - MBIOI - VIU
Adjusting Prices for Iron and Silica Content
Metal Bulletins chemistry adjustments represent the market
implied value of individual chemistries based on regression
analysis of actual transaction data included in the Metal
Bulletin 62% Fe Fines Iron Ore Index.
Metal Bulletin represents the implied value of one percentage
point of Iron (Fe) and Silica (Si) which may be used as an
adjustment factor for material that differs from the published
62% Fe Fines Index base specification.
The relationship between price and chemistry in the iron ore
market is a complex one, and is generally acknowledged to be
non-linear. However, analysis of the spot market data shows
that a linear relationship between price and iron content can
be applied within certain ranges while maintaining statistical
validity.
Metal Bulletin | 16
For more details on this report please contact Metal Bulletin at mbioi@metalbulletin.com
Metal Bulletin | 17
MBIOI Calendar
MBIOI Calendar is a unique tool to stay up to date on relevant
iron ore, steel and economic variables that affect the
international iron ore market.
The MBIOI Calendar tracks data and announcements relevant
to the global iron ore and steel markets. Data from a wide
range of sources is available along with previous readings and
forceasts to provide user with the best possible tools to
Carry over verified transaction data from other sub-indices on the day.
2.
Carry over verified transaction data from the previous day in the appropriate sub-index.
3.
Carry over verified transaction data from the previous day from any sub-index .
4.
Carry over assessment data from the previous day in the appropriate sub-index.
5.
Carry over offer/bid data from the previous day in the appropriate sub-index.
6.
Carry over assessment data from the previous day from any sub-index.
7.
Carry over offer/bid data from the previous day from any sub-index.
8.
If no price data can be collected then the index price will be carried over.
Metal Bulletin | 19
Metal Bulletin | 20
Metal Bulletin | 21
The pure spot market is not as concentrated as the contract market, with a long tail of suppliers. These include India, Iran, South
Africa, Brazil, Australia, Venezuela, Indonesia and Chile. Ultimately, we aim to reflect the market, so the concentration of sellers does
not affect the index.
What is your methodology for calculating normalisation coefficients?
The data is normalized using our in-house models. The value-in-use applied by the market is calculated through a regssion analysis of
collected data.
The value of any material or brand in the spot market is based on a combination of chemistries, physical parametres and a number of
soft factors. We do not impose premiums or discounts ourselves, we allow the market to do that and we reflect the relative value of
each material or brand to the base specification going forward. Perceived discounts and premiums belong to the Chinese market and
we simply reflect those. We have different curves for different materials and origins as appropriate.
How are freight rates addressed in the normalisation process? Is this done on a CFR basis or underlying FOB basis?
The index is produced on a CFR basis. Normalisation occurs with regard to the port of delivery relative to our base port Qingdao.
There is up to five days sailing time between ports in China, and as such, this can greatly affect the value in use that the consumer
place on a particular transaction. If the port is further north then a figure is subtracted from the official price to normalise it to
Qingdao. Ports further south have a figure added on the transaction price. The actual number that is added or subtracted is calculated
daily using freight figures received from a leading international shipping broker. We also take into account the different routes taken
along with different handling costs that exist at different locations. This gives us a very representative figure that changes
automatically with the freight rates.
How do you deal with trades reported using a long-term freight commitment compared to a spot freight rate?
No adjustment. Freight is up to supplier or consumer. Any advantage or disadvantage is the issue for the supplier as we are not
speculating to or from FOB prices.
How frequently are your normalisation coefficients re-calculated?
For our daily indices they are updated monthly. Our weekly indices are recalculated quarterly. For our value-in-use chemistry
adjustments recalculation also takes place monthly. The relative values of different grades and types of ore are constantly changing.
By updating coefficients at these frequencies we are able to capture these changes whilst the calculation retains statistical
significance.
How are actual quality variances reported when trades are advised on the basis of indicative/expected specification?
Eac h trade is agreed on expected delivery specifications. This is what the trade is settled on if it turns out to be different then that is
an issue between the two parties who agreed the contract, and who would typically have agreed penalties etc. The index is not back
adjusted.
What is not captured by the normalisation process, brand, synergies, other?
Some brands will have different values given to them. Our index represents an underlying value of the market and as such trades can
be settled against our price either at a premium or discount as deemed appropriate by the parties concerned.
Metal Bulletin | 22
Disclaimer
This Disclaimer is in addition to our Terms and Conditions as available on our website and shall not supersede or otherwise affect these Terms and Conditions. Prices and other
information contained in this publication have been obtained by us from various sources believed to be reliable. This information has not been independently verified by us. Those
prices and price indices that are evaluated or calculated by us represent an approximate evaluation of current levels based upon dealings (if any) that may have been disclosed prior to
publication to us. Such prices are collated through regular contact with producers, traders, dealers, brokers and purchasers although not all market segments may be contacted prior to
the evaluation, calculation, or publication of any specific price or index. Actual transaction prices will reflect quantities, grades and qualities, credit terms, and many other parameters.
The prices are in no sense comparable to the quoted prices of commodities in which a formal futures market exists.
Evaluations or calculations of prices and price indices by us are based upon certain market assumptions and evaluation methodologies, and may not conform to prices or information
available from third parties. There may be errors or defects in such assumptions or methodologies that cause resultant evaluations to be inappropriate for use. Your use or reliance on
any prices or other information published by us is at your sole risk. Neither we nor any of our providers of information make any representations or warranties, express or implied as to
the accuracy, completeness or reliability of any advice, opinion, statement or other information forming any part of the published information or its fitness or suitability for a particular
purpose or use. Neither we, nor any of our officers, employees or representatives shall be liable to any person for any losses or damages incurred, suffered or arising as a result of use or
reliance on the prices or other information contained in this publication, howsoever arising, including but not limited to any direct, indirect, consequential, punitive, incidental, special
or similar damage, losses or expenses.
We are not an investment adviser, a financial adviser or a securities broker. The information published has been prepared solely for informational and educational purposes and is not
intended for trading purposes or to address your particular requirements. The information provided is not an offer to buy or sell or a solicitation of an offer to buy or sell any security,
commodity, financial product, instrument or other investment or to participate in any particular trading strategy. Such information is intended to be available for your general
information and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Your investment actions should be solely
based upon your own decisions and research and appropriate independent advice should be obtained from a suitably qualified independent adviser before any such decision is made.
COPYRIGHT NOTICE: Metal Bulletin Limited, 2014. All rights reserved. No part of this publication (text, data or graphic) may be reproduced, stored in a data retrieval system, or
transmitted, in any form whatsoever or by any means (electronic, mechanical, photocopying, recording or otherwise) without obtaining Metal Bulletin Ltds prior written consent.
Unauthorised and/or unlicensed copying of any part of this publication is in violation of copyright law. Violators may be subject to legal proceedings and liable for substantial monetary
damages for each infringement as well as costs and legal fees.
Metal Bulletin | 23
For more information about the Metal Bulletin Iron Ore Indices and how they
can help you, please do not hesitate to contact the Index team:
mbioi@metalbulletin.com
Singapore
Christopher Ellis
cellis@metalbulletin.com | +65 65970924
Alexandra Archakova
aarchakova@metalbulletin.com | +65 65970921
London
Inaki Villanueva
ivillanueva@metalbulletin.com | +44 (0)20 7827 6468
Peter Hannah
phannah@metalbulletin.com | +44 (0)20 7827 6448
Shanghai
Karen Shi
karen.shi@metalbulletinasia.com | +86 21 5877 0857-35
Ginger Ding
ginger.ding@metalbulletinasia.com | +86 21 5877 0857
Hong Kong
Joanne Badger
joanne.badger@metalbulletinasia.com | +852 2842 6953
Australia
Ben Johnstone
bjohnstone@metalbulletin.com | +61 3 5221 0715
Metal Bulletin | 24