Monday, 18 May 2009
The Metal Bulletin Iron Ore Index will soon be provided on a daily basis giving an accurate and up-to-date benchmark for both the clearing of iron ore swaps and physical pricing. This will be in addition to the weekly index currently provided.
Metal Bulletin Iron Ore Index Director Cameron Hunt announced the decision Monday saying:
“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.”
“The liquidity and volume now visible in this market has allowed Metal Bulletin to extend the coverage of its sophisticated weekly index methodology, based on actual transactions, to a daily calculation.”
The MBIO Index meets the needs of both the physical market participants and the financial community as it is the only index based on actual transactions and specifically developed to prevent undue market manipulation. It gives an accurate and timely reflection of the market place, allowing confident pricing of physical material and settlement of financial instruments.
“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 minimise unfair market influence,” said Hunt.
Following the adoption of the MBIO Index as the physical pricing indicator of choice for a wide range of market participants, the index will now provide a daily settlement price for both cleared and uncleared over-the-counter swaps as well as physical bookings. This will aid daily mark-to-market accounting and improve the accuracy of the index as a reflection of physical spot market business.
Both financial and physical market players have welcomed the news:
"There is a market appetite for a robust daily price index at a critical time in the development of the iron ore swaps market. Credit Suisse has been the leading developer in this market, and this announcement will be welcomed by its customers," said Kamal Naqvi, Director, Commodities at Credit Suisse.
"The launch of a credible and accurate daily price in the iron ore market will greatly aid pricing transparency in the market. Metalloyd has been actively involved in the Chinese spot import market since 2001, and a daily reference price will be of significant use to us and our clients," said Richard Shelley, Trader at Metalloyd.
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