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Francis Browne, 19 th March 2013 16 th Global iron & steel forecast, Perth

Iron Ore Price Discovery

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Francis Browne, Editorial Director – Price Group, Platts has presented at the Global Iron Ore & Steel Forecast Conference. If you would like more information about the conference, please visit the website: http://bit.ly/13MkVsy

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Page 1: Iron Ore Price Discovery

Francis Browne, 19th March 2013

16th Global iron & steel forecast, Perth

Page 2: Iron Ore Price Discovery

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

$

!

Page 3: Iron Ore Price Discovery

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

Page 4: Iron Ore Price Discovery

Published methodology

Page 5: Iron Ore Price Discovery

An introduction to eWindow

Page 6: Iron Ore Price Discovery

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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

Page 7: Iron Ore Price Discovery

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

Page 8: Iron Ore Price Discovery

http://www.platts.com/newsfeature/2012/metals/plattsironore/index

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Page 9: Iron Ore Price Discovery

Platform trade data

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Page 10: Iron Ore Price Discovery

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

Page 11: Iron Ore Price Discovery

Price Discovery – Market on Close

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Offers

Bids

Time stamped Cut-off for new bids/offers

Deals

Page 12: Iron Ore Price Discovery

FeWindow – launch March 22, 2013

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Page 13: Iron Ore Price Discovery

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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Page 14: Iron Ore Price Discovery

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

Page 16: Iron Ore Price Discovery

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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.

Page 17: Iron Ore Price Discovery

Delivery into the spot market

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Page 18: Iron Ore Price Discovery

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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Page 27: Iron Ore Price Discovery

Thank you

Francis Browne [email protected]

[email protected]