Electronic iron ore trading platforms could generate new price indices and bring more transparency to the market, according to a top executive from Vale.
Platforms such as China Beijing International Mining Exchange (CBMX) and Global Ore will allow spot transactions to be settled via on-screen bids and offers, bringing more clarity to the global iron ore market.
“It is possible that these platforms will generate new indices, which will be based on [actual] transactions,” José Carlos Martins, Vale’s director of iron ore and strategy, told Metal Bulletin during a press conference call.
“An index resulting from such platforms would, in my opinion, have a higher predictability than the current indexes,” Martins said.
Long-term contracts could be based on such new indices, the executive explained – the same way it happens today with the existing indices, which include Metal Bulletin Iron Ore Index (MBIOI).
Vale has been already increasing sales through tenders, which now account for 10% to 15% of the company’s total shipments, according to Martins.
This is still lower than the average 50% level seen in China and 30% globally, he noted.
In some cases the winning price is higher than indices prices, Martens said.
“Long-term contracts will still [represent] a great part of iron ore [sales], but spot sales are likely to continue increasing,” Martins pointed out, adding that Vale remains a “great supplier” under long-term contracts.