There are a few hard commodities that doesn’t have a futures market and until now iron ore was one of them. But unlike diamonds which also doesn’t have futures, iron has more strategic importance in the industrial world.

Iron ore is the primary raw material used in the production of steel –
and the world’s second largest commodity by value, after crude oil.
Because iron ore has historically traded under long-term fixed price
contracts between steel mills and mining companies, iron ore is the
world’s largest commodity without a significant derivatives market.

Intercontinental Exchange (ICE) is all set to change the way iron ore
will be traded as it launches iron ore swaps contract on December 2 in
association with Platts. ICE OTC cleared iron ore contract based on the
well-regarded Platts Iron Ore Index. The ICE Platts Iron Ore Swap 62%
Fe (metallic iron) contract will be available for clearing on ICE Clear
U.S.

“As a major input to steel production, iron ore is essential to the
global economy and is one of the largest commodities today without a
fully developed derivatives market,” said Mike Davis, Director of
Market Development, ICE Futures Europe. “We have designed the contract
to meet the requirements of participants in the iron ore and steel
industries so that they are able to manage price risks around steel
input costs, just as they have long been able to do with other factors
of production such as oil and coal.”

Iron ore is a mineral with metallic iron (Fe) content. High grade iron
ore contains at least 60% Fe content, and the industry has adopted the
62% Fe specification as a standard benchmark for derivative
transactions. The ICE Iron Ore Swap is based upon the most commonly
traded grade of iron ore, referencing 62% Fe content delivered by sea
to China. The contract will be cash settled against a daily index price
published in Platts Metals Alert (PMA) under the heading ‘IODEX: Iron
Ore fines 62% Fe CFR North China’

Platts introduced to the global marketplace the world’s first daily
price assessments of seaborne iron ore in June 2008. “At that time,
Platts recognized the importance of a fast-evolving spot market in iron
ore, one of the largest commodity sectors globally,” said Karen McBeth,
editorial director of the Platts metals group. “After their
introduction, our iron ore assessments quickly became the most
important indicator of value at a time when the industry was changing
its long-term contractual practices,” she added.

Platts’ price assessments are underpinned by a robust methodology of
guidelines and quality protocols. Its IODEX assessments are based on
all-day market monitoring and data collection of transactions, bids,
offers and other information from market participants during the Asian
business day until the market close at 18:30 Singapore time. The data
is normalized and a neutral origin 62% Fe content iron ore fines price
assessment is published immediately in Platts’ Metals Alert (PMA), a
real-time metals price and news wire service. The data is published
again at the end of the U.S. trading day in Platts’ Steel Markets
Daily, an online and print publication that offers news, market
commentary and price information aimed at the steel, construction and
auto industries as well as commodities-focused money managers
worldwide.

“The Platts daily IODEX assessment of iron ore delivered to China has
not only received wide acceptance as an accurate and independent
benchmark for pricing physical cargos, but has facilitated the very
development of transparent price discovery in this burgeoning market,”
noted Francis Browne, director of steel and iron ore at Platts. “With
ICE Clear’s launch, the financial community will now be able to benefit
from Platts’ long experience in spot market valuation and have another
tool to help address risk mitigation.”

The global spot market for iron ore fines, a key steelmaking
ingredient, is dominated by China’s import market. China imported 471
million metric tons in 2008 and is on target to import 630 million
metric tons this year to feed its growing steel demand, which is highly
correlated to its economic growth.

Platts has been assessing prices in the metals markets for more than 35
years, drawing on the tradition of its parent company, The McGraw-Hill
Companies, which has covered the metals markets since 1930.

Since its June 2008 introduction of daily seaborne iron ore
assessments, Platts has rapidly expanded its offering for the iron ore
market, which now includes price assessments for iron ore grades 62% Fe
and 63.5/63% Fe, high-grade 65% Fe and a low-grade 58% Fe, as well as a
daily 1% per Fe content differential for 60-63.5% iron ore fines to
help clarify the normalization process. Platts also publishes daily
freight netbacks based on the most liquid routes to five basis origins.
A first-ever forward curve assessing the daily bid/offer and trade
values in the over-the-counter swaps market for iron ore has also
recently been launched. (Courtesy: PRNewswire)

Source: PRNewswire

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• The deadlock of Sino-Australian iron ore negotiations in domestic steel mills led to losses

    Some research institutes said that the effort made by China to ask Australian ore makers to reduce more price did not benefit domestic steel mills, instead lift their purchasing cost. China hopes to get more beneficial price from Australian manufacturers, but its efforts backfired. The body pointed out that some steel mills

• Imports of ore inventory went into the main ports in the past week

    Data showed that till the close of last week, the imported ore inventories was 66.45mln tons, down 300,000 tons from the previous week. Till the end of last week, the stock of Australian ore decreased 440,000 tons to 21.51mln tons, Brazilian ore dropped 50,000 tons to 19.05mln tons and Indian

• S. Korean steelmakers Begin to Raise Steel Prices

    Amid the recent rise in raw material prices, South Korea’s price of steel products including an iron bar is to increase. According to industry insiders on Monday, Hyundai Steel has decided to raise its steel prices centering on long products and apply price increases from on February 2. Consequently, other

• China pig iron price go up again recently

    It is learned that China’s steel mills still maintain high production, strong demand and short supply, which help China domestic pig iron price go up again.

• CISA see: Domestic steel market, a better performance in 2010

    Luo Bingsheng, the executive vice chairman of the China Iron&Steel Association (CISA), has predicted that the steel market in China will indicate a better performance in 2010. Mr.

• Iron ore market in Hebei province, with increased stability

    Steel market fluctuated at the low level recently, but iron ore price in Hebei market did not be affected. In turn, some steel mills were enthusiasm in purchasing, which drove iron ore price to increase slightly with stabilization. Source from markets noted that many medium and small mines have stopped production

• Iron ore price negotiations – Steel price cycle is different

    Baosteel stated that the company’s January prices reflected the prices gap of different products but iron ore and steel products’ price cycles are apparently different. Baosteel said that up to now, the iron ore agreement prices are all annual, and the negotiation has lasted for half a year’s time, while

• China MiIT supported CISA and CCCMC in negotiations with foreign companies

    Zhu Hongren, spokesman for China’s Ministry for Industry and Information Technology (MIIT) has made a statement against the background of the iron ore contract price talks for 2010.

• China freezes talks on iron ore price John Garnaut, Shanghai

    THE tough-talking China Iron and Steel Association is failing to talk at all with its iron ore negotiating partners, as steel mill members ignore its directives and entrench the Japanese benchmark price as their own. “Nobody is talking to anyone,” said a well-placed executive at a large mining company, adding that

• East Asian steel scrap and pig iron imports continue to rise offer

    The tight supply and increasing spot ore price propelled the import offer of East Asia scrap steel and pig iron to climb continuously. Presently the price of No.1 and No.2 heavy scrap stands at U.S.$360-365 per ton (CFR) and the offer of pig iron increases to U.S.$380-390 per ton (CFR).

• Russian Platts reference prices for new Asia-bound oil starting from mid-December

    Platts, the energy information division of The McGraw-Hill Companies, plans to launch a price assessment for the new Russian crude oil which is slated to start flowing to Asian markets on December 16. The new crude stream, East Siberian Pipeline Oil (ESPO), will be exported from the port of Kuzmino

• Masteel of Maanshan Iron Ore Group Buy

    It is reported that general meeting of shareholders of Masteel Co approved its Ore Purchase and Sale Agreement with Maanshan Iron & Steel Group, a three year agreement signed on October 15th. With the agreement Masteel Corporation can expect stable iron ore supply for its growing steel capacity on a

• Iron ore price negotiations – CISA sees 10pct hike in 2010

    Metal Biz reported that while analysts forecast a boosted steel demand in 2010, the China Iron & Steel Association also sees a 10% rise in 2010 to 2011 fiscal year’s iron ore contract prices, as steel production will need more iron ore. According to analysis from officials of CISA, China

• Iron ore price negotiations – High spot prices fueling big hike

    Annual iron ore benchmark talk for fiscal 2010 is coming, under which spot iron ore price hit record high. Bur some investment banks raised their forecast increase on long-term iron ore contract price for next year owing to the robust demand from China and other regions in the world. On

• Ansteel built steel production recorded historically high levels in 2009

    In 2009, the production of iron, steel and steel products from Ansteel amounted to 20.5095mln tons, 20.1266mln tons and 18.9979mln tons respectively, all set best level historically, thereinto, the annual output of iron and steel firstly exceeded 20mln tons. Under the impact of the financial crisis, the steel price slumped