Iron ore: Trading
How China's spot market killed the annual benchmark
How China's spot market killed the annual benchmark What this tab covers How and where it is bought and sold: who buys and sells, exchanges and benchmarks, contract types, the big trading houses and how prices are discovered.For decades iron ore prices were set in annual talks: Australian miners with Japanese mills, Brazilians with European mills. The first settlement became the benchmark for everyone (Humphreys; Tilton & Guzmán). The system broke down as China's spot market grew and big miners saw spot prices far above contract. Today long-term contracts float monthly or quarterly on indices, chiefly the 62% iron fines price delivered to China, published by agencies such as Platts and Fastmarkets. Futures and swaps trade on SGX in Singapore and the Dalian Commodity Exchange.
Where it is bought (buyers)
- Chinese steel mills, increasingly through the state buyer China Mineral Resources Group, take about three-quarters of seaborne ore (73.6% of 2024 import value)
- Japanese, Korean and Taiwanese integrated mills buy on long-term contracts (6.3%, 4.6%, 1.3% of 2024 imports)
- European mills buy Brazilian, Canadian and Swedish pellets and fines
- Indian mills buy domestically from NMDC, OMC, auctions and merchant miners
Where it is sold (sellers)
- Rio Tinto, BHP and Fortescue from Port Hedland and Dampier (Australia 55.4% of 2024 export value)
- Vale from Ponta da Madeira and Tubarao (Brazil 20.1%)
- Canadian, South African, Swedish and Ukrainian exporters of pellets and concentrate
- Indian miners export some low-grade fines and pellets, mostly to China
Exchanges and benchmarks
| Venue | Contract | Notes |
|---|---|---|
| SGX (Singapore) | Iron ore 62% Fe CFR China futures and swaps, 100 t lots, USD | Main international hedging venue |
| Dalian Commodity Exchange (DCE) | Iron ore futures, 100 t lots, CNY, physical delivery at Chinese ports | China's domestic benchmark futures market |
| CME | Iron ore 62% Fe CFR China (Platts) futures | Smaller USD alternative |
Contract types
- Long-term supply contracts priced monthly on the average of a 62% Fe index, with grade and impurity adjustments
- Spot cargoes sold by tender or on trading platforms against index plus or minus premium
- Port-side yuan sales of ore from Chinese port stocks
- India: monthly list prices from NMDC and lease-level auctions and e-auctions in Odisha
Top trading houses
- Trafigura
- Cargill (ferrous desk)
- Chinese state traders such as Minmetals and Xiamen C&D
How prices are discovered
- S&P Global Platts IODEX 62% Fe CFR North China
- Fastmarkets MB 62% and 65% Fe indices
- DCE and SGX futures settlement prices
- Mysteel port-side prices; BigMint Indian ore indices; IBM average sale prices for royalty