Steel Index adds two new iron ore reference prices

Data provider Steel Index said on Wednesday it has launched two more reference prices for iron ore that reflect specific grades of the raw material to aid long-term contract pricing.

The new reference prices include one for iron ore fines with 62% iron content and 2% alumina content while the other is for 63.5/63 grade with 3.5% alumina, Steel Index said in a statement. Both are priced with freight delivered to Qingdao port in China.

"The addition of the new reference prices will make it easier for parties using long-term supply contracts to index-link to a relevant spot series," said Rory MacDonald, head of iron ore operations at Steel Index.

MacDonald said the 2% alumina content grade is in line with ores mined in Western Australia's Pilbara belt and in southern Brazil which are mostly sold via quarterly contracts. The 63.5/63 grade references ore mined in India, he added.

This brings Steel Index's iron ore reference prices to four, including the existing 62% and 58% benchmarks, both with 3.5% alumina priced with freight for delivery to China's Tianjin port.

Global miners like Vale and Rio Tinto have been using iron ore price indexes as basis in determining rates for quarterly contracts with buyers of the steelmaking ingredient following the collapse of decades-old annual pricing arrangement in April.

Tight supplies have lifted index-based iron ore prices to record highs last month, suggesting second-quarter contract rates are likely to rise again after an estimated 7% to 8% increase in the first quarter.