Pricing mechanisms have many subtleties and variations relating to costs, freight rates, quality factors, and exchange rates, but the underlying forces are still dictated by the balance between supply and demand.
iron ore prices have historically been negotiated annually in closed-door talks between individual miners of the steelmaking ingredient and their customers in Asia and Europe, and once one set of agreements/contracts is concluded, the other miners generally follow with similar arrangements (i.e., setting the “market price”). It seems this arrangement goes back to the days when it was the
Japanese who led the negotiations and everything was timed according to the end of their fi nancial year. To some, this arrangement is a vestige of something that no longer exists. Now the majority of China’s iron ore consumption comes either from domestic sources or from supplies outside benchmark-basis contracts. The benchmark pricing system exists to provide price guidance for other settlements that are agreed to following the first annual price settlement. This is the basis of the benchmark pricing system.
In North America, prices are negotiated under the conditions of the North American market (i.e., “Eastern Canada Pellet Price”). Canadian producers are price-takers. Prices for fi nes are usually established fi rst and used as a benchmark for pellets and lump ore negotiations. Often fines and lump or pellet premiums are established together as part of an overall package. Most iron ore prices are fixed annually under long-term sales contracts, although the spot market becomes more important during recessions.
There is a spot market in iron ore that tends to cover single cargo sales not covered by longer-term contracts. It is particularly used when there has been an upturn in steel demand and integrated steelworks quickly expand output. It is generally lump and fine material, which can be used to increase blast furnace output in the short term, that is traded on the spot market. The price system for pellet feed has no worldwide unified standard. The negotiated Eastern Canadian, seaborne, and international prices for blast furnace pellets are usually settled annually between producers and their customers. Generally speaking, concentrate prices are about one-half that of pellet prices.
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Pricing mechanisms have many subtleties and variations relating to costs, freight rates, quality factors, and exchange rates, but the underlying forces are still dictated by the balance between supply and demand.
iron ore prices have historically been negotiated annually in closed-door talks between individual miners of the steelmaking ingredient and their customers in Asia and Europe, and once one set of agreements/contracts is concluded, the other miners generally follow with similar arrangements (i.e., setting the “market price”). It seems this arrangement goes back to the days when it was the
Japanese who led the negotiations and everything was timed according to the end of their fi nancial year. To some, this arrangement is a vestige of something that no longer exists. Now the majority of China’s iron ore consumption comes either from domestic sources or from supplies outside benchmark-basis contracts. The benchmark pricing system exists to provide price guidance for other settlements that are agreed to following the first annual price settlement. This is the basis of the benchmark pricing system.
In North America, prices are negotiated under the conditions of the North American market (i.e., “Eastern Canada Pellet Price”). Canadian producers are price-takers. Prices for fi nes are usually established fi rst and used as a benchmark for pellets and lump ore negotiations. Often fines and lump or pellet premiums are established together as part of an overall package. Most iron ore prices are fixed annually under long-term sales contracts, although the spot market becomes more important during recessions.
There is a spot market in iron ore that tends to cover single cargo sales not covered by longer-term contracts. It is particularly used when there has been an upturn in steel demand and integrated steelworks quickly expand output. It is generally lump and fine material, which can be used to increase blast furnace output in the short term, that is traded on the spot market. The price system for pellet feed has no worldwide unified standard. The negotiated Eastern Canadian, seaborne, and international prices for blast furnace pellets are usually settled annually between producers and their customers. Generally speaking, concentrate prices are about one-half that of pellet prices.