iron ore price discovery

Francis Browne, 19th March 2013

16th Global iron & steel forecast, Perth

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

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Extensive Global Reach

In the last year we have increased to almost 1000 people and more offices

Mexico City

Boston

Hightstown Pittsburgh

São Paulo

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Perth, Melbourne

Published methodology

An introduction to eWindow

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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

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

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

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Platform trade data

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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

Price Discovery – Market on Close

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Offers

Bids

Time stamped Cut-off for new bids/offers

Deals

FeWindow – launch March 22, 2013

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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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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

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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.

Delivery into the spot market

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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

Furnace Economics (Fe) Steelmakers seek flexibility

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Spread 65% vs IODEX has been reducing

Source: Platts

Same spread monthly – less noisy

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All grades spreads have converged

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IODEX 62%

Steel Mill Economics

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IODEX correlates with Tangshan Billets

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Thank you

Francis Browne francis_browne@platts.com

IODEX@platts.com