Metal Bulletin Iron Ore Index Guide

Methodology, Specifications and Usage

May 2017
Metal Bulletin Iron Ore Index Guide
Methodology, Specifications and Usage - May 2017
This guide is intended to introduce market participants to the Iron Ore Indices provided by Metal Bulletin.

About Metal Bulletin

The Metal Bulletin Group aims to provide leading pricing intelligence, including independent industry benchmarks, for the metal and
mining industry. The group’s global portfolio of news, analysis, conferences and insight services complement these price benchmarks.

Our price reporters assess over 2,000 non-ferrous, ferrous, raw material and non-metallic mineral prices, many of which are the industry
standard benchmarks, trusted and used across the industry supply chain.

We are a completely impartial and independent price reporting agency and engage with all sides of the market, including sellers, buyers
and traders, during the price discovery process.

Metal Bulletin is wholly owned by Euromoney Institutional Investor PLC. and is a constituent of the FTSE 250 Index.

Contents

Introduction 4
Methodology
Data Provision and Quality 4
Index Calculation 5
Publication 6
Corporate Structures and Compliance Oversight 7
Iron Ore Methodology Flow Diagram 8
Fines Indices- 62% Fe, 58% Fe and 58% Fe Premium, CFR Qingdao 9
65% Fe Brazilian Fines, CFR Qingdao and 63% Fe Australian Lump Premium 10
65% Fe Blast Furnace Pellet and 66% Fe Concentrate Indices, CFR Qingdao 11
62% Fe China Port Stocks Index, RMB/wmt, FOT 12
Product differentials - Pilbara Blend Fines Differential 13
Chemistry Adjustments - Iron, Silica, Alumina and Phosphorus Value-In-Use Indices 14
Contact Us 16

This document dated May 2017 supersedes all previous Metal Bulletin iron ore index methodology documents. The most up-to-date methodology will always be
available to downnload at: www.mbioi.com

Metal Bulletin | 3
INTRODUCTION METHODOLOGY

METHODOLOGY RATIONALE DATA COLLECTION AND QUALITY

The primary role of the Metal Bulletin Iron Ore Indices is to The basis of all our Indices is the data provided by the market. In
provide market participants with a fair and robust representation order to provide a representative price for the market, we aim to
of the physical iron ore spot market price. Metal Bulletin’s collect as many representative data points as possible.
rationale to adopt and develop the price discovery process and
the methodology described in the present guide is to produce a Any market participant involved in the physical iron ore spot
consistent and representative indicator of market value to suit the market may contribute data to the indices following a review by
iron ore market’s requirement for a transparent pricing Metal Bulletin of their activities. The aim is to ensure that
mechanism. submitters have sufficient visibility and understanding of the
market to be able to provide reliable price data. Metal Bulletin
The indices aim to be reflective of the price levels seen during the aims to engage a broad and balanced range of physical market
data collection time period or window and to be a reliable participants in the provision of data.
indicator of value of the iron ore market they relate to. The data
collection period taken into consideration to calculate the indices, Metal Bulletin’s Data Submitter Policy provides guidelines to
e.g. 24 hours, is determined by Metal Bulletin after considering ensure the high level of data quality and integrity that Metal
the number of data points that Metal Bulletin can reasonably Bulletin expects from contributing organisations providing pricing
expect to collect on a consistent basis over the selected period to data. The Policy can be found on Metal Bulletin’s website or is
support the index calculation process. available upon request.

The global benchmark pricing system for iron ore ended in 2009 Metal Bulletin encourages data sources to provide data on all their
and since then the vast majority of transactions have been linked concluded transactions and welcomes provision of data from
to spot prices. Metal Bulletin supports the process of price employees in back office functions.
discovery through its established and independent position in the
metals market. Metal Bulletin utilises a number of methods to collect data. These
include phone calls, email, and digital messenger services across
The iron ore market is constantly developing. Metal Bulletin our offices in Singapore, Shanghai, London and Sao Paulo.
reviews its methodology and specifications, and engages in
discussions with market participants on a regular basis to ensure The deadline for data submission is 6.15pm Singapore time. Data
that it remains as representative of the market as possible. received after this time will not be included in the calculation of
the index. For indices that are calculated daily, the data collection
Metal Bulletin will look to develop and introduce new indices in window runs for the 24 hours prior to the 6.15pm data submission
response to market demands and changes in pricing dynamics deadline. For indices that are calculated weekly, the data
with respect to different types and grades of iron ore. collection window runs for the 7 days prior to the 6.15pm data
submission deadline. Only trades concluded, and bids and offers
The Metal Bulletin Iron Ore Index methodology has been submitted and market participants’ own assessment
designed to meet the requirements of the financial market as well communicated to Metal Bulletin within the data collection
as the physical market. The Metal Bulletin 58% Fe Premium Index window will be included in the calculation of the indices. The
is used by the Singapore Exchange (SGX) as the settlement price indices are reflective of the price levels seen during this stated
for 58% Fe iron ore derivatives. collection period.

All the reference units, such as currencies and volumes units used
in the indices, are in line with recognised iron ore market
conventions and the reference units used in these markets. All

Metal Bulletin | 4
index specifications have a minimum volume size accepted. bias or any single data provider having an overbearing influence
on the final Index.
All data supplied to Metal Bulletin Iron Ore Indices is kept strictly
confidential. Metal Bulletin Iron Ore Indices may sign Transaction data received via GlobalORE and COREX will be
Non-Disclosure Agreements (NDA) upon request with any data entered into each sub-index. This reflects the balanced nature of
provider. ownership of the platforms.

INDEX CALCULATION Normalisation

The Metal Bulletin Iron Ore Indices are tonnage-weighted Nearly all material traded on the iron ore spot market differs from
calculations, where actual transactions carry full weight as the base specification of the indices. This price data requires
reflected by the reported volume, while offers, bids and market normalisation in order to determine the equivalent price for the
participants’ own assessment of the market are weighted at the respective index base specification.
specified minimum tonnage for the respective index.
Material that falls within the target specification range is
Metal Bulletin aims to collect full details of each transaction normalised to the index base specification and port of delivery.
including brand, commercial terms and any other details relevant The base specifications and ranges have been chosen following
to value and pricing. consultation with the market to reflect the reality of the physical
spot market.
The development of electronic trading platforms has led to a
number of changes in the iron ore spot market. Metal Bulletin will Data is normalised to the base specifications using in-house
include price data from both GlobalORE and COREX in Index developed models based on regression analysis of the collected
calculations. data points. The analysis allows Metal Bulletin to capture the
value-in-use applied by the market to different materials, and to
Market Balance normalise to a single specification. This normalisation process also
allows Metal Bulletin to capture and normalise factors outside of
The Metal Bulletin Iron Ore Index methodology is designed to the chemical and physical properties such as values associated
provide market participants with a fair and robust reflection of the with individual brands.
physical iron ore spot price level. The methodology incorporates
structures and mechanisms to ensure a balanced and consistent The normalisation coefficients for the daily Indices are updated
calculation, which is able to resist possible undue influences. every month to reflect the constantly changing value-in-use
relationship of different products and grades. Weekly iron ore
The Metal Bulletin Iron Ore Indices are structured to balance the Indices have their normalisation coefficients updated every
influence of all sides of the market. This reduces the potential risk quarter. This reflects different levels of data liquidity between the
of market distortions and bias in the data and ensures that all parts markets. Our aim is to balance the requirement to keep the value-
of the market have the same influence on the final Index in-use calculations reflective of the market, and also provide a
calculation. statistically robust data set for analysis.

The published Index figure is the straight average of three Specification payment terms are based on typical commercial
sub-indices, each of which contain data from a single part of the practice in the iron ore spot market. Transactions that are
market; producers (miners), consumers (mills) and traders*. Each conducted on different payment or credit terms can be
sub-index is a tonnage-weighted calculation of normalised price normalised, taking into account discounts, interest rates and
data. Only the final Indices are published. The use of three standard commercial terms.
sub-indices means that each part of the market has a maximum of
33% weighting in the final index. This removes the possibility of Material in different physical form is excluded as necessary from
the index in question. Domestic Chinese material, and material

*Exception being China Port Stock Index - see page 12

Metal Bulletin | 5
imported by routes other than by sea, for example by train or In the event that in a particular pricing session the dataset
truck, is also excluded. Material that has been delivered and is held collected is not considered suitably robust (such as too few data
on stockpile at the dock is also excluded except in the China Port points on the day) for the calculation of a particular index, Metal
Stock Index. Bulletin will implement the following fall back procedures (1-9)
until a suitable number of data points is reached to calculate the
Criteria To Discard Pricing Data And Removal Of Outlier Data Index:

Metal Bulletin uses its expert judgment to exclude prior to 1. Carry over transaction data from other sub-indices on the day.
inclusion in the model unrepresentative numbers and discard 2. Carry over assessment data from other sub-indices on the day.
prices that it believes may otherwise be questionable and 3. Carry over transaction data from the previous day in the
unreliable. appropriate sub-index.
4. Carry over transaction data from the previous day from any
Furthermore, the Metal Bulletin Iron Ore Indices have been sub-index .
specifically constructed to automatically exclude outlier data. All 5. Carry over assessment data from the previous day in the
data points that fall greater than 4% away from an initial calculated appropriate sub-index.
Index are automatically excluded, and the index recalculated. 6. Carry over offer/bid data from the previous day in the
Outliers will be investigated, and suspected attempts to unfairly appropriate sub-index.
influence the Index may result in the data provider being warned 7. Carry over assessment data from the previous day from any
or excluded. sub-index.
8. Carry over offer/bid data from the previous day from any
Metal Bulletin reserves the right to see contracts and signed sub-index.
paperwork before inclusion of the data in the calculation. If this is 9. If no price data can be collected then the index price will be
refused, the data supplied may be excluded from the calculation carried over.
process. Metal Bulletin reserves the right to exclude data that is
not fairly presented or is believed may be an effort to distort the In the unlikely situation that more than half of the pricing data
Index. collected on a day is provided by a single source, Metal Bulletin will
use the fall back procedures 3-9 (see above) to ensure there is not
Index Calculation During Periods Of Low Data Liquidity dependency on a significant proportion of data being provided by
a single entity.
All Metal Bulletin Iron Ore Indices are calculated based on price
data collected from the market. The Indices are set up so that PUBLICATION
actual transactions have the greatest effect on the final calculated
price. Daily indices are published at 6.30pm Singapore local time.
Weekly indices are published Friday 6.30pm Singapore local time.
Metal Bulletin aims to calculate each index based on a robust data Monthly Value in Use indices are published at 6.30pm on the first
set and as such will, where necessary, look to utilise price data working day of the month.
including assessments, offers and bids collected from the market.
Data points that do not represent actual transactions will be Indices are not published on Singapore public holidays.
entered into the Indices like transaction data but will be weighted
according to the lowest tonnage permissible for the respective Singapore public holidays 2017* are as follows:
index. 2nd January 2017 New Year’s Day Public Holiday
30th January 2017 Chinese New Year Public Holiday
Metal Bulletin does not specify a minimum amount of transaction 14th April 2017 Good Friday
data, or a transaction data threshold, required for the publication 1st May 2017 Labour Day
of its Indices as liquidity varies across the iron ore markets. 10th May 2017 Vesak Day
26th June 2017 Hari Raya Puasa

Metal Bulletin | 6
9th August 2017 National Day methodology, refer to Metal Bulletin’s Internal and External
1st September 2017 Hari Raya Haji Review Process and Metal Bulletin’s Change to the Methodology
18th October 2017 Deepavali Consultation Process documents available on Metal Bulletin’s
25th December 2017 Christmas Day website.
*source: www.mom.gov.sg
Procedure To Ensure Consistency In The Price Discovery
Where public holidays occur on a Friday, the weekly indices will be Procedures
published on the preceding working day and will reflect price data
from that week’s working days. Metal Bulletin aims to maintain the highest standards in the
provision of prices to those involved in the global metals industry.
Corrections And Delays All Metal Bulletin pricing employees are required to adhere to
Metal Bulletin’s Code of Conduct and Pricing Guidelines.
If an Index is published incorrectly, it will be rectified and
republished as soon as possible. A correction notice will be sent to Prior to publication all indices are subject to peer review and are
all subscribers. signed off by a senior member of the editorial or index team. This
peer review process is in place to make sure that pricing
Metal Bulletin employs a number of procedures and measures to procedures and methodologies are correctly and consistently
avoid delays in the publication of its Indices. However, in the event applied and to ensure integrity and quality of the published prices.
of a delay occurring, Metal Bulletin will inform subscribers as soon Full details of data inputs and calculations are stored in Metal
as possible. Bulletin’s electronic database and may be accessed at any time for
internal review and auditing purposes.
In the event of late publication only data that has been received
within the correct standard timeframe will be included in the Index Related Queries And Complaints
calculations. No Indices will be amended due to the emergence of
new data or market activity after the initial publication. Metal Bulletin encourages engagement from the market on its
Retrospective changes to the published values will only be made pricing principles and methodology. The company promotes
in cases of administrative or calculation error. understanding of its calculation procedures and is committed to
responding to requests for further information and clarification
METHODOLOGY AND PRICE SPECIFICATIONS REVIEW PROCESS on a timely basis.

Metal Bulletin aims to continually develop and periodically revise There are multiple channels for interaction with the Index
its methodologies in consultation with industry participants, with department including email, telephone and instant messenger
the objective to adopt product specifications and trading terms services.
and conditions that reflect and are representative of typical
working practices in the iron ore industry. If a subscriber has an issue with the published prices, then they
may contact the Index team. In the event that the response is not
Any change to the methodology and/or price specifications are satisfactory the issue may be escalated to the internal compliance
implemented following a consultation process which starts with department. For more details refer to Metal Bulletin’s Complaint
Metal Bulletin posting on its website an advance pricing notice Handling Policy available on Metal Bulletin’s website.
providing clear details and a timeframe for the change proposed.
The objective of the consultation process is to give market Metal Bulletin takes all queries and complaints seriously and will
participants sufficient time and opportunity to provide feedback seek to provide an explanation of the prices wherever possible. It
and views about the change proposed. is important to note, however, that calculation models and input
data remain confidential and cannot be provided to third parties.
For more details on the formal periodic review of the methodology
and details of the consultation process to propose changes to the

Metal Bulletin | 7
 Capturing the relationship
between different materials

Data collected ‘One-way’ Materials from different origins

from wide range of Information flow exhibit different value-in-use to
participants; with
option of NDA.
Phone Email Website Messenger between Index
department and
the Chinese market. As a result,
different origins and brands have
editorial. unique normalization curves and
coefficients

Data Collection Model Metal Bulletin PB

Yandi
Metal
Bulletin’s IOCJ
Calculated
Coefficients Other...
Normalisation procedure
Prices normalized based on Fe content, brands and freight rates
Australia
Freight rates Capesize Route

India Brazil
Supramax Route Capesize Route

The data from the day’s Normalisation coefficients

Three sub-indices; model is collected and based on value-in-use
each tonnage
weighted to
Producers Consumers Traders stored to create the next
month’s normalisation
curves are developed In
house. The coefficients are
balance market. coefficients. created using the previous
month’s price data.

A preliminary Index figure Outliers lying more

is calculated from the
three sub-indices. Each
Preliminary MBIO than 4% away from
the mean price are
sub index is volume
weighted.
Index Figure excluded and the
index calculated
once more.

The final index is the

non-weighted
average of the three
sub-indices.
MBIO Index

Bloomberg MBIOI Website Daily Email

Reuters
www.mbioi.com Alert

Metal Bulletin | 8
62%, 58% and 58% Premium, Fe Fines CFR Qingdao

The MBIOI-62 is a benchmark price representing the iron ore fines implied by the market. The index is rounded to two decimal places. The
market. All transaction data within the specification ranges below, are MBIOI-58 is a daily index published at 6.30pm Singapore time.
normalised to the base specification based on the value-in-use
implied by the market. The index is rounded to two decimal places. In addition to the MBIOI-58, Metal Bulletin publishes a daily differential
The MBIOI-62 is a daily index published at 6.30pm Singapore time. premium for 58% Fe high specification; low alumina and phosphorous
material (MBIOI-58P). The MBIOI-62 and MBIOI-58 are rounded to two
The MBIOI-58 is a price representing the lower grade iron ore fines decimal places. The premium is rounded to the nearest $0.50. The
market. All prices within the specification maximums below are figure representing the combined MBIOI-58 and High Specification
normalised to the base specification based on the value-in-use Premium is the 58% Fe Premium Index.

MBIOI - 62 MBIOI - 58 MBIOI – 58P (High Specification)

Price Price Price

US$ per dry metric tonne, CFR China US$ per dry metric tonne, CFR China US$ per dry metric tonne, CFR China
Material Origin Material Origin Material Origin
All Origins All Origins All Origins
Fe Content Fe Content Fe Content
Base 62%, Range 56% to 66% Base 58%, Range 56% to 60% Base 58%
Silica Silica Silica
Base 3.5%, Maximum 8.0% Base 5.5%, Maximum 9.0% Base 5.5%
Alumina Alumina Alumina
Base 2.0%, Maximum 4.0% Base 3.5%, Maximum 5.0% Base 1.5%
Phosphorus Phosphorus Phosphorus
Base 0.10%, Maximum 0.15% Base 0.08%, Maximum 0.15% Base 0.05%
Sulphur Sulphur Sulphur
Base 0.02%, Maximum 0.06% Base 0.04%, Maximum 0.07% Base 0.01%
Loss on Ignition (%DW)
Base 4.7%, Maximum 11.0%
Moisture Moisture Moisture
Base 8.0%, Maximum 10.0% Base 8.0%, Maximum 10.0% Base 8.0%
Granularity Granularity Granularity
Base Size >90% < 6.3mm, at least 90% <10.0mm, Base Size >90% < 6.3mm, at least 90% <10.0mm, >90%<10.0mm
at most 40% <0.15mm at most 40% <0.15mm
Trade Size Trade Size Trade Size
Minimum 30,000 tonnes Minimum 30,000 tonnes Minimum 30,000 tonnes
Payment Terms Payment Terms Payment Terms
Payment at sight, other terms normalised to base Payment at sight, other terms normalised to base Payment at sight
Delivery Port Delivery Port Delivery Port
Base Qingdao, normalized for any Base Qingdao, normalized for any Qingdao
Chinese mainland sea port Chinese mainland sea port
Delivery period Delivery period Delivery period
Within 8 weeks Within 8 weeks Within 8 weeks
Publication Publication Publication
Daily at 6.30pm Singapore time Daily at 6.30pm Singapore time Daily at 6.30pm Singapore time

Data History From: Data History From: Data History From:

May 2008 August 2011 August 2011

Metal Bulletin | 9
65% Fe Brazilian Fines Index, CFR Qingdao 63% Fe Australian Lump Premium,
CFR Qingdao
The MBIOI-65-BZ is a price representing the Brazilian origin iron ore The MBIOI-LP reflects the premium, in US¢/dry metric tonne units,
fines market. All transaction data within the specification maximums that Australian origin lump within the specifications defined below,
below, are normalised to the base specification based on the value- commands on a spot basis over the benchmark 62% Fe Fines Index
in-use implied by the market. The index is rounded to the nearest (MBIOI-62). The premium is rounded to the nearest 0.50¢. The
$0.10. The MBIOI-65-BZ is a daily index published at 6.30pm MBIOI-LP is a daily index published at 6.30pm Singapore time.
Singapore time.

MBIOI – 65 - BZ MBIOI - LP

Price Price
US$ per dry metric tonne, CFR China US¢/dry metric tonne units (dmtu)
Material Origin Material Origin
Brazil Australia
Fe Content Fe Content
Base 65.0%, Range 63.5% to 66.0% Base 63%, Range 61% to 65%
Silica Silica
Base 2.7%, Maximum 3.7% Base 3.5%, Maximum 5.0%
Alumina Alumina
Base 1.2%, Maximum 1.6% Base 1.5%, Maximum 2.0%
Phosphorus Phosphorus
Base 0.045%, Maximum 0.060% Base 0.08%, Maximum 0.10%
Sulphur Sulphur
Base 0.01%, Maximum 0.05% Base 0.02%, Maximum 0.04%
Loss on Ignition (%DW)
Base 5.0%
Moisture Moisture
Base 9.0%, Maximum 10.0% Base 4.0%, Maximum 6.5%
Granularity Granularity
>90%<10.0mm, <40%<0.15mm Max 13.5%<6.3mm Max 25%>31.5mm

Trade Size Trade Size

Minimum 30,000 tonnes Minimum 30,000 tonnes
Payment Terms Payment Terms
Payment at sight LC on sight, other terms normalised to base
Delivery Port Delivery Port
Qingdao CFR Qingdao, normalized for any Chinese mainland sea port
Delivery period Delivery period
Within 10 weeks Within 8 weeks
Publication Publication
Daily at 6.30pm Singapore time Daily at 6.30pm Singapore time

Data History From: Data History From:

August 2013 May 2013

Metal Bulletin | 10
65% Fe Blast Furnace Pellet, CFR Qingdao 66% Fe Concentrate, CFR Qingdao

The MBIOI-PT is a price representing the iron ore blast furnace pellet The MBIOI-CO is a price representing the iron ore concentrate
market. All transaction data within the specification maximums market. All transaction data within the specification maximums
below, are normalised to the base specification based on the value- below, are normalised to the base specification based on the value-
in-use implied by the market. The index is rounded to two decimal in-use implied by the market. The index is rounded to two decimal
places. The MBIOI-PT is a weekly index published Friday at 6.30pm places. The MBIOI-CO is a weekly index published Friday at 6.30pm
Singapore time. Singapore time.

MBIOI-PT MBIOI-CO

Price Price
US$ per dry metric tonne, CFR China US$ per dry metric tonne, CFR China
Fe Content Fe Content
Base 65%, Range 60% to 70% Base 66%, Range 63% to 70%
Origins Origins
All Origins All Origins
Silica Silica
Base: 4.5%, Maximum: 6.0% Base: 4.5%, Maximum: 9.0%
Alumina Alumina
Base: 0.4%, Maximum: 0.8% Base: 0.5%, Maximum: 2.0%
Phosphorus Phosphorus
Base: 0.03%, Maximum: 0.05% Base: 0.02%, Maximum: 0.06%
Sulphur Sulphur
Base 0.01%, Maximum 0.02% Base 0.03%, Maximum 0.10%
Moisture Titanium
Base 2.0%/DW, Max 3.0%/DW Base 0.05%, Maximum 0.30%
Granularity Moisture
Maximum Size >90% >10.0mm Base 8.0%/DW, Max 11.0%/DW
Compression Strength Granularity
Base 250daN, min 200daN Maximum Size >80% <0.15mm. Undersize maximum 20%<0.05mm
Trade Size Trade Size
Minimum 10,000 tonnes Minimum 10,000 tonnes
Payment Terms Payment Terms
LC on sight- other payment terms normalised LC on sight- other payment terms normalised
Delivery Port Delivery Port
Base Qingdao - normalized for any Chinese mainland sea port Base Qingdao - normalized for any Chinese mainland sea port
Delivery Delivery
Seaborne Imports- within 8 weeks Seaborne Imports- within 8 weeks
Publication Publication
Weekly. Friday at 6.30pm Singapore time Weekly. Friday at 6.30pm Singapore time

Data History From: Data History From:

April 2012 September 2012

Metal Bulletin | 11
62% Fe Port Stock Price

The China Port Stock Index represents the market for imported iron The price is quoted in RMB per wet metric tonne, and includes 17%
ore sold at main Chinese ports. VAT and port fees. The index is rounded to the nearest Yuan.

The MBIO China Port Stocks Index (MBIOI – CPS) is based on a Due to the nature of participants in the port market, the index is a
tonnage-weighted calculation of actual transactions of imported tonnage weighted average of all transactions. They are not split into
material conducted at main Chinese ports. The prices of material sub-indices as is the case in the rest of Metal Bulletin’s indices.
included in the specified range are normalised to the base
specification based on the value-in-use implied by the market. An The normalised chemistry specification is identical to the benchmark
additional adjustment is applied to normalise the port of sale to the 62% Fe CFR fines index in order to provide to best possible opportunity
base location, Qingdao, based on the prior month’s relative prices. for comparison.

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 0.10%, 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 6.30pm Singapore time

Data History From:

January 2014

Metal Bulletin | 12
Product Differentials to MBIOI-62 Direct Reduction Grade Pellet Premium

Individual products in the iron ore spot market frequently trade at a Direct-reduction is a unique method of iron making, which requires
differential to the underlying 62% Fe Fines Index (MBIOI-62). specific raw materials. In particular, the process necessitates the use
of iron ore pellet that is higher in Fe and lower in gangue, than can be
Metal Bulletin publishes the differential in $/tonne that Pilbara used in the blast furnace. The cost associated with upgrading ore to
Blend Fines (MBIOI-Diff-PBF) achieves on a spot basis relative to the a DR-Grade level pellet, and the relative rarity of its supply, accounts
MBIOI-62. for this material obtaining a premium in the market.

Metal Bulletin will look to introduce further product differentials if The DR-Grade Pellet Premium is conventionally quoted as the
the number of transparent spot deals is considered suitably additional value component that a DR-Grade Pellet commands after
frequent. Metal Bulletin considers transparent trades to be those the Iron Value-In-Use adjustment over the CFR China 62% Fe Fines
completed on GlobalOre, COREX or by tender. Benchmark (MBIOI-62) and freight adjustments have been applied.

Pilbara Blend Fines Differential (MBIOI-Diff-PBF) This ‘Premium’ component is negotiated between the buyer and
seller and reflects the specific value of processing costs and supply
The MBIOI-Diff-PBF represents the differential in $/tonne that 62% and demand fundamentals associated with the higher Fe feedstock
Fe Pilbara Blend Fines achieves on a spot basis relative to the required for production. The index is rounded to the near $0.50. The
MBIOI-62. Pilbara Blend Fines transactions that take place on a MBIOI-DRP is a monthly index published on the last working day of
different Fe basis will be adjusted to 62% Fe using a linear the month at 6.30pm Singapore time.
adjustment.
MBIOI-DRP
The calculation of the differential is the tonnage-weighted average
of transparent transactions of that product on a given day, minus the Price
MBIOI-62 on that day. US$ per dry metric tonne, Middle East Reference
Fe Content
The sum of the MBIOI-62 and the published differential represents Base 67.5%
the actual value at which the particular product traded in the spot Origins
market on that day. All Origins
Silica
In the absence of trade, the product differential is maintained until Base 1.5%,
another transparent trade is observed. When the differential Alumina
remains unchanged, the implied product value will continue to Base 0.5%
move with the underlying movement in the MBIOI-62. Sizing
94% < 9.0mm,
The differential is rounded to the nearest $0.01. The MBIOI-Diff-PBF Trade Size
is a daily figure published at 6.30pm Singapore time. Minimum 10,000 tonnes
Payment Terms
The implied value of Pilbara Blend Fines is represented by the Payment at sight, other terms normalised to base
combined MBIOI-62 and MBIOI-Diff-PBF. This index is called the Delivery Port
MBIOI-PBF. Middle East Reference
Publication
Monthly. Last working day of the month, 6.30pm Singapore time

Metal Bulletin | 13
Value-In-Use Indices
Adjusting Prices for Iron, Silica, Alumina and Phosphorus

Metal Bulletin’s chemistry adjustments represent the market They should be used as a differential from their respective reference
implied value of individual chemistries based on regression analysis indices. Note that these VIU-indices measure the price impact of a
of actual transaction data. specified percentage point of that chemistry, all other factors being
equal.
Analysis of spot market data shows that linear relationships between
price and selected indivdual chemistries can be applied within The chemistry adjustment factors are published on the first
certain ranges whilst maintaining statistical validity. working day of the month and are based on a regression analysis of
the previous month’s transaction data.
The value-in-use adjustments are intended as a tool for price
adjustments, all other factors being equal.

Application of MB Value-In-Use indices

Iron Value In Use Adjustment (Fe -VIU) Silica Value In Use Adjustment (Si-VIU )

Value of Iron Ore at X% Iron Value of Iron Ore at X% Silica

= MBIOI62 + (% Fe difference from 62% * Fe-VIU Index) = MBIOI62 + (% Si difference from 3.5% * Si-VIU Index)

Calculated from data in the 60.0% -63.5% Fe range Calculated from data in the 60.0% -63.5% Fe range
Optimised range: 60-63.5% Fe Optimised range: 3.5-9.0%
Data history from July 2012 Data history from December 2013

Iron Value In Use Adjustment (Fe-65VIU) Alumina Value In Use Adjustment (Al-VIU )

Value of Iron Ore at X% Iron Value of Iron Ore at X% Alumina

= MBIOI-65-BZ + (% Fe difference from 65% * 65Fe -VIU Index) = MBIOI62 + (% Al difference from 2.0% * Al-VIU Index)

Calculated from data in the 63.5% -66.0% Fe range Calculated from data in the 60.0% -63.5% Fe range
Optimised range: 63.5-66%Fe Optimised range: 1.0-3.5%
Data history from January 2015 Data history from November 2014

Phosphorus Value In Use Adjustment (P-VIU )

Value of Iron Ore at X% Phosphorus

= MBIOI62 + (0.01% P difference from 0.10% * P-VIU Index)

Calculated from data included in the MBIOI-62

Optimised range: 0.04 - 0.13% P
Data history from October 2015

Metal Bulletin | 14
 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 London

Christopher Ellis Jon Mulcahy

cellis@metalbulletin.com | +65 6238 2117 jon.mulcahy@metalbulletin.com | +44 20 7827 6480

Peter Hannah Inaki Villanueva

phannah@metalbulletin.com | +65 6238 2113 ivillanueva@metalbulletin.com | +44 20 7827 6468

Shanghai

Karen Shi
karen.shi@metalbulletinasia.com | +86 21 5877 0857-30

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Metal Bulletin | 16