May 05, 2020 | 02:01 PM | New York | Thorsten Schier

Fastmarkets AMM is proposing to change the way it calculates monthly averages from a rolling average to a simple average, to align its methodology globally and add consistency to its price offerings.

The initial three-month consultation period for this proposal will run from Monday February 10 through May 11.

Simple averages use only the price points on the day of an assessment to calculate averages, while rolling averages use daily price points - including prices republished on non-assessment days. For example, a simple monthly average for a price that was assessed weekly in February 2020 would consist of four price points versus the 20 used for a rolling average.

**Simple average**

Fastmarkets’ simple monthly averages, traditionally published by Fastmarkets MB, are calculated by dividing the sum of all price quotations within a month by the number of quotations published during the calendar month.

For assessments, Fastmarkets MB derives both the monthly average high price and the monthly average low price using this method. For indices, a single monthly average price point is calculated.

For example, the weekly chrome ore South Africa UG2 concentrates index basis 42% cif China was calculated five times during the month of June 2018.

Prices were published each Friday from June 1, 2018, with the assessments reading $206 per tonne, $208 per tonne, $210 per tonne, $211 per tonne and $208 per tonne during the period.

The simple monthly average is calculated by taking the sum of the five assessments and dividing that by the total number of assessments over the period - in this case, five.

The simple monthly average for June 2018 was $208.60 per tonne. Most prices produced outside of the Americas are typically calculated on a simple-average basis.

**Rolling average**

Fastmarkets’ rolling monthly averages, traditionally published by Fastmarkets AMM, are calculated by dividing the sum of the daily price quotations - including prices republished on non-assessment days - by the number of quotations published during the calendar month.

For assessments, Fastmarkets AMM derives both the monthly average high price and the monthly average low price using this method. For indices and single-price assessments, a single monthly average price point is calculated.

In a rolling average scenario, prices are published on a daily basis, regardless of how frequently they are updated. Daily price quotations are rolled over on working days until the following price change, excluding holidays and weekends. No pricing inputs are published on holidays or weekends.

For example, there were five weekly price quotations for the chrome ore South Africa UG2 concentrates index basis 42% cif China in June 2018, with the first price update made on June 1.

According to Fastmarkets AMM’s calculation, the price assessment from that Friday is rolled over and republished on the Monday, Tuesday, Wednesday and Thursday of the following week, with the newly updated price published each Friday.

The rolling monthly average is then calculated by taking the sum of all daily published prices and dividing it by the total number of inputs over the period - in this case, 21. The rolling monthly average price for June 2018 is therefore $208.71 per tonne.

Fastmarkets proposes to switch its monthly-average calculations for prices in the following markets to simple averages:

- Non-ferrous scrap
- Base metals
- Steel
- Ferrous scrap, excluding regional domestic assessments - such as Chicago, Detroit, etc - but including export yard prices, the export indices, Mexican scrap prices and the Midwest scrap indices

To see all of Fastmarkets AMM's pricing methodology and specification documents, click here.