On April 13, Han Xun, the manager of the China Steel Group (SBB) TSI Index, saw the iron ore swap trading information of the Singapore Exchange (SGX, hereinafter referred to as the SGX). The trading volume in March was 2.12 million tons. It is the third highest in history after 2.15 million tons in April 2010 and 2.2 million tons in January this year. At the same time, the amount of open positions in March also hit a record high. The SGX is currently the largest exchange of iron ore swap contracts (IOS), accounting for about 70% of the global market; in addition, the two futures exchanges in India, ICEX and MCX, started in January and February this year. There is also a good iron ore futures trading volume. Han Xun found that the three high-volume months in the history of the SGX are all months of high price fluctuations. "This can confirm that participants have the need to use swap transactions to hedge their risks. This is developed by market forces. And the results are obtained." Corresponding to the SGX data is the Chinese iron ore spot market. In March, the average price of imported iron ore in China was US$160.71/ton, up 58.35% year-on-year. At the same time, the import volume also rebounded sharply. China imported iron ore in March. 59.48 million tons, an increase of more than 10 million tons from last month. The iron ore index, a concept that was originally unrelated to the traditional steel industry, became a tool for determining prices and affecting market volatility, as the entire Chinese steel industry seems to be unprepared. Market institutions predict that the impact of future indices on the iron ore market will become more apparent. The three-legged trip In June 2008, Platts launched the world's first daily price assessment service for seaborne iron ore to the global market. A year later, the service was adopted by BHP Billiton as the basis for its global iron ore pricing index. Subsequently, major institutions began to launch their own iron ore index. At present, there are three major iron ore indexes in the international market, namely TSI Index of Global Steel News, MBIO Index of Metal Bulletin, and Platts Index of Platts. Among them, the Platts Index has attracted much attention because it has become the basis of iron ore pricing. The Platts Index is derived from the spot price in the Chinese market and was initially based on a 62% grade iron ore trading price. According to Platts, the reason why the Chinese market is used as the price base is because the Chinese import market has a dominant position in the global iron ore market, accounting for 50% of the global total demand for iron ore, accounting for more than 60% of the global shipping market. Spot imports are high, transactions are frequent, and spot import prices are the most transparent in the world. Prudential Index Asia Business Development Senior Director Hua Dawei told this newspaper that the Platts Index values ​​iron ore prices through extensive communication with market participants, mainly from steel mills and iron ore production. Business, but Platts price is not the average of all prices in China. According to reports, every day, Platts market analysts will communicate with the above-mentioned institutions that are more active in the market, get their "inquiry price" from the buyer, that is, the price that the buyer wants the transaction to reach, get them from the seller. The "offer price" is the price that the seller wants to reach. Platts will take the highest inquiry price and the lowest offer price for the day, as a competitive price that truly reflects the market, and value it based on these prices. However, Platts' "valuation" is not an "index", so the Platts price is deviated from the other two competitors, the Metal Guide's MBIO index and TSI index. Martin, the metal guide, told the newspaper that the MBIO index is based on the tonnage weighted calculation based on the actual transaction volume on the day of the transaction. The calculations take into account the quality of different grades of iron ore, the location of the mine and the Factors such as the location of the goods. Martin said that the index is not particularly biased towards one party in the development process, and each data source plays the same role for the final index. The MBIO index is based on the price of 62% grade iron ore in Qingdao port. The index has three sources of data: steel mills, mines and traders, each accounting for one-third of the total. Every day, they collect data from three sources and report it to the London headquarters. Experts there will first perform a weighted calculation of the volume of each indicator, and then integrate the three indicators on average to arrive at the final index. In the specific compilation process, any collected data will be excluded if it is higher than 4% or less than 4% of the data to be weighted. According to Martin, the calculation method makes it impossible for any party involved in the market to dominate the price, even if weighted calculations are used. If one party (such as an iron ore miner) reports high data, it will only affect 33% of the index calculation. According to reports, within the MBIO index model, there are 20-25 statistical data points, most of which are from China, including major Chinese steel companies. Some of the main participants signed a confidentiality agreement with the Metal Bulletin, which will automatically send the data to the Metal Bulletin. In addition, the Metal Guide has signed an agreement with the Shanghai Iron and Steel House, which will provide additional data to the Metal Guide based on its contract with the steel company. Global Steel News TSI index is from the United Kingdom, its Chinese regional manager Han Xun introduced that the TSI index and Platts transaction basis is not the same, all the TSI data is the actual spot situation of the market, the spot transaction actual transaction data source comes from the spot Active companies in the market, the volume of transactions is derived from the actual market. Han Xun said that in the index market, it is basically two main lines. Platts is mainly the spot market promoted by the three major mines. TSI has an advantage in the financial market. The choice of mine MBIO index director Cameron told the newspaper that two or three years ago, China's steel mills and China Iron and Steel Association were cautious about the use of index pricing, but the three major miners let them There is no choice on this issue because the supplier is still dominant in the current negotiations. According to the simple understanding of Chinese steel mills, the three major mining companies based on the spot price information incurred in the previous pricing cycle of the Platts Index as the basis for the contract price of the next cycle. After the Platts Index was selected as the pricing base by the mine, the China Iron and Steel Association accused the Platts index of being too scientifically transparent and not comprehensive enough, and was too affected by the mine. Hua Dawei, senior director of Asia Business Development at Platts Index, did not clearly explain why the Platts Index became the pricing standard adopted by mining companies. He said that among all the market participants, more than half of the Chinese participants can roughly reach 60%. Platts can also represent the Chinese market. Now all the markets have caught the signal of spot, and Platts has captured this signal in the evaluation. Platts Energy's steel industry editor Chen Liming denied that the Platts index was manipulated by mining companies. He said that Platts does not approve of market information for any particular member. Reliable sources and active in the market are in the process of evaluation. The principle of consideration. But he also said that the spot price is determined by the most competitive bid increments, quotations and transactions, rather than the total amount. In the eyes of other competitors, the Platts Index can be recognized by mining companies, hiding more commercial considerations. What makes Martin the metal guide interesting is that although both the mine and the steel mill generally recognize the MBIO index as the most stringent method, the final mine choice is the Platts index rather than the MBIO index. In Martin's view, the Platts Index is an assessment of market news, not a strict mathematical calculation based on actual trading. In fact, the price of ore calculated by the Platts Index is $2 higher per ton than the MBIO index. Martin said that the price of $2 per ton is significant when talking about millions of tons of contracts. So the Platts Index is very popular with mines that specify them in the contract, and they have a stronger negotiating position. In Hanxun's view, the reason why the Platts Index can be recognized by the mining company is because it was founded earlier, the Platts index has already had an impact on the energy raw materials market, and on the other hand, it is also related to the mining company. The Platts index is more familiar, but ultimately it is the result of market choices, which form can be profitable, and which form the company chooses. For the three major mining companies, they are satisfied with the current pricing system based on the Platts Index. Rio Tinto CEO Ai Boonian said that the index-based quarterly price is a more balanced pricing system between long-term and spot prices, and it is more reasonable. Rio Tinto will not pursue a more short-term pricing. Vale CEO Annelli once told the media that the quarterly iron ore pricing mechanism is still good at present, at least this mechanism is working normally, but this mechanism needs to be consolidated, and the consolidation process will take some time. BHP Billiton has always been the insister and promoter of index pricing, and its global CEO, Gorus, has expressed his enthusiasm for a more short-term indexed pricing system on many occasions. Gorris said that the index pricing method can reflect the market changes in a timely manner, so it is more reasonable. The transfer of discourse power, however, is not without long-term considerations, and the three major mines are not always strong. Platts Energy's steel industry editor Chen Liming told this newspaper that the market has changed from a long-term contract transaction to a greater dependence on the spot market. In the next few years, the market will continue to expand to gain revenue in the spot market. It is very similar to the development model of the oil market in the past. MBIO index director Cameron also believes that the index market will develop in a more short-term direction, and the contract signing cycle will be gradually shortened. He said, "The market will still adopt a quarterly contract and will develop into a monthly contract in the future. In addition, the market share of the spot market will increase, it may occupy 100% of the market, but this will take a long time. Time.†But Cameron said that this trend does not have a negative impact on the Chinese market. Because in fact, the price is determined by the spot market. The increase in the proportion of the spot market may make the steel mills in a more favorable position in the negotiations, and the steel mills will have a stronger voice, for example, decide which index to use. Cameron said that we welcome steel companies to use the MBIO price index to price or negotiate contracts. The advantage of adopting the MBIO price index when a steel company signs a quarterly contract with an iron ore plant will be obvious. Because their index is not controlled by any market, this is unique among index providers, and other providers will not. The major steel mills that are now aware of the trend of indexing have begun investigating the different methods offered by the index. It is said that after analyzing the specifications and systems of iron ore, Baosteel prefers to use the MBIO index of the Metal Guide. Han Xun, manager of the global steel TSI index in China, has had exchanges with some steel mills in China. His feeling is that steel mills are not concerned with the index of who they use today. For them, today we use our TSI or use Platts tomorrow. The IODEX is the same, they are more concerned about the development of the rules of the game. Is it long association, quarterly pricing or monthly pricing? They care about how this specific operation works, and pay attention to the transparency and methods of this rule. Hanson believes that the index is generated outside of mines and steel mills and is provided by a third party with a neutral standard. Indexed pricing has become a major trend, and China Steel Association should no longer warn or limit the promotion of the index in China. Hanson said: "Because of these restrictions, we feel that in the actual compilation process of the index, communication with Chinese steel mills is far less smooth than communication with mining companies. This will further weaken the Chinese steel mills in the index. The sound in the compilation is not good for the demand side."
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