core sector communique

 

TSI Iron Ore Index best reflects average spot price

London, UK. 30 March 2010

The Steel Index (TSI) daily iron ore reference price for 62% Fe content fines has proved to be the most accurate reflection of the average daily iron ore spot market price.
 
 “This is no surprise,” says Steven Randall, Managing Director of TSI. “Our daily reference prices are based on actual transactions completed, with the data submitted to us by participants throughout the supply chain. TSI’s reference prices are calculated as the volume-weighted average of prices submitted by miners, traders and steel mills. We don’t focus on the latest price or bids and offers discussed in the market each day, as some other indices do. This can be misleading.”

He adds, “TSI’s approach ensures our reference prices represent the entire market picture, giving steel mills, traders and miners the confidence they need when moving to index-based pricing arrangements, whether quarterly or monthly.”

Analysis of the three leading iron ore price indices has demonstrated that TSI’s reference price is closest to the average. Over the past 6 months, the average daily deviation of TSI’s reference price from the average of the three indices has been only 0.7%, while the other indices have shown average deviations of 1.0% and 1.1% respectively.

Today’s TSI iron ore reference price for 62% Fe content fines reached a new 12-month high of $153.6 per dry metric tonne CFR Tianjin port in China.
 
TSI’s average reference price for March will be published on the last day of the month tomorrow. This is the figure used by many industry participants in their physical index-linked price arrangements and also exclusively by the Singapore Exchange (SGX) and LCH.Clearnet in London for settlement of their respective cleared iron ore swap contracts.

Similarly TSI’s average price for January-March 2010 will also be published tomorrow, which will be of great interest to companies moving onto quarterly index-based price arrangements. The miners BHP-Billiton, Rio Tinto and Vale have expressed their intention to use index-linked pricing for a substantial portion of their business this year.  TSI’s average price for Q1-to-date is $131.24 per dry metric tonne.