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When forecasts fail: Tools for navigating markets

Chris Newman, Argus Steel Feedstocks senior editorInforma Australia Global Iron Ore & Steel Forecast Conference30 March 2017

2016: Year of missed predictions

Copyright © 2017 Argus Media Ltd. All rights reserved.

Source: yougov.com

Source: Upshot nytimes.com

Source: Argus Consulting Services outlook (Nov 2015)

Source: Argus 12 July 2016

Contents


Index update: narrows gap with liquidity

Value-in-Market (ViM) quality adjustments

New ICX-LP 62% index

Off-screen trade data

• One of the world’s leading PRAs with a team of 800 from 20 global offices

• Publishing 11,000 daily spot and forward price assessments, plus market intelligence for world commodities markets

• Coverage includes:◦ Energy

◦ Fertilizers

◦ Petrochemicals

◦ Global metals

• Services◦ Price reporting and indexation

◦ Consulting

◦ Conferences

• Indexation examples◦ US crude oil

◦ US and European refined products

◦ US and European natural gas

◦ Global NGLs

◦ World thermal and coking coal

Iron ore approach derived from thermal coal


ICX index: quality changes have shift higher


Spec at launch

5% Si

0.09% P

2% Al

ICX initially used in basket

to price BHP Jimblebar fines

ICX index: survey feeds it and a data feed


C

N

Y

Published in table, data feedForm 50% survey-50%

deal indexes

But IOSCO sets the priority order for indexes

1. Transactions

2. Bids/offers

3. All other information

Value-in-Market (ViM) quality adjustments replace ViU


ViM adjustments tether ICX-LP to ICX index


ICX-LP $1.05/t differential set by

Si, Al and P ViM adjustments

ICX-LP

ICX ICX-LP

Fe 62% 62%

Silica 3.75% 4.75%

Alumina 2.25% 2%

Phosphorus 0.1% 0.06%

ICX-LP launched October 2016

Cataloging off-screen trade finds, tracks trends


86% of +7,000 parcel data points from June 2016-early March 2017 were these brands

Subscribers want to analyze off-screen history


offer bid deal

PB fines floating premiums

Index month:

QP:

Roy Hill fines offers* maintain floating premiums


Index month:

M+0 M+1 M+2 DealQP:

*As single or combocargo with Roy Hill L

SSF floating offers* remain under pressure


M+0 M+1 M+2QP:

*with contractdiscount to 62% index

Index month:

SSF traders use M+1 QP to play swaps curve


M+0 M+1 M+2QP:

Index month:

SSF % discounts track offers for related products


SSF contract % discount

Cross-referenced data reinforces indexes, stories


Illustrative pellet premiums

Pellet premium market level

Pellet bid

Floating deal

Portside deal

Fixed price deal

Pellet offer

Conclusion


Iron ore indexes focus on liquidity centre

Users want more granular information

Data-based information is better

Copyright notice Copyright © 2017 Argus Media Ltd. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus.

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Disclaimer All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

Christopher NewmanSenior editor, Argus Steel Feedstocks+65 6496 9959

[email protected]

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