Spot prices for seaborne iron ore imported into China have fallen by more than 20% in a month, from a peak of $186 per metric ton (mt) on April 20, 2010, to $147.5/mt on May 24, 2010, according to Platts data. Platts provides daily price assessments for iron ore reflective of the transactable value in the spot open market. The drop in value mirrors similar declines for basic raw material commodities around the globe. China imports more than 60% of the world’s seaborne iron ore supplies.
“Concerns over sovereign debt in the Eurozone seem to be hitting all key commodities globally,” said Jorge Montepeque, director of market reporting, Platts. “These primary industrial inputs are being affected by the recent market bearishness over concerns of possible economic contraction and thus, resource need reductions, resulting from the broader sovereign debt.”
Prior to Platts’ introduction of daily price assessments in this benchmark iron ore, known as IODEX and reflecting 62% Fe (iron) content, the commodity’s pricing was traditionally established by the iron ore industry through a once-yearly single auction and long-term contract process.
Steel prices are also on the retreat, Platts data shows. Hot rolled coil, the base material for the automotive and so-called white steel good industries, is also being knocked by the bearish tone in many world markets, said Francis Browne, global director of steel and metals market reporting, Platts. Prices for steel coil destined to Europe and the Middle East have lost more than $80/mt over a similar month-long period as for iron ore, with base steel material now trading at $585/mt in the Black Sea, a price level not seen since March 25, 2010, he said.
“History shows a tight correlation between economic concerns and the down-trending financial markets to base materials prices,” said Browne. “For example, iron ore hit a low of $57/mt in November 2008 at a time when the ‘credit crunch’ buffeted financial and commodity markets.”
Platts claims its 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.
In addition to 62% Fe iron ore, Platts also provides physical market price assessments for 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.