Adjustment to normalization calculation of manganese ore high grade indices

Fastmarkets’ MB-MNO-0001 Manganese ore high grade index, cif Tianjin, $ per dmtu, and MB-MNO-0005 Manganese ore high grade port index, fot Tianjin, China, yuan per dmtu, track the spot prices of high-grade manganese ore in the seaborne CIF China market and Chinese portside market respectively, with manganese content and other chemical specifications set to match the prevailing brands.  

Due to significant changes in the market, Fastmarkets proposed to amend the chemical specifications of its indices for high grade CIF and FOT Tianjin manganese ore on July 28.

The proposal was aimed at adjusting Fastmarkets’ chemical specifications to bring them into line with the current market amid frequent changes in the manganese content of commonly-traded ores in recent months. 

After a consultation period and having considered market feedback, Fastmarkets announced it had decided not to proceed with the proposal to amend the chemical specifications of its high grade CIF and FOT Tianjin manganese ore indices.

Fastmarkets considers an adjustment to the current normalization calculation is still needed to adjust and reflect the lower liquidity and diversity of material in the market. In line with market feedback received, this adjustment should be kept within the current parameters of the methodology and the same chemical specifications, to maintain stability of the indices.  

Accordingly, Fastmarkets has continued to engage with the market as to best adjust the index normalization calculations to the current conditions.  

As a result, and following the most recent feedback, Fastmarkets has decided to amend only part of the normalization calculation.  

The normalization calculation will have two steps or components: step one — brand adjustment component — which has always been part of the calculation and will remain unchanged, and step two, — new proposed pro-rata component. 

Using regression analysis, the brand adjustment step brings price inputs referring to different brands or materials to a brand or material that is liquid and similar in specifications to Fastmarkets’ index. The pro-rata component will apply a pro-rata calculation using the manganese content to bring the price numbers attained after step one to an equivalent of 43.5% Mn content of Fastmarkets’ index. The pro-rata calculation is a common procedure used in the market as a value-in-use measure for manganese content adjustments. 

This falls within the current methodology: “Data is normalized to the base specifications using in-house models based on regression analysis of the collected data points. The analysis allows Fastmarkets to capture the value-in-use applied by the market to different materials, and to normalize to a single specification. This normalization process also allows Fastmarkets to capture and normalize variables outside of the chemical and physical properties such as values associated with regional origin and product-specific factors,” while keeping the index chemistry specifications the same. 

This adjustment in the calculation will start to be applied on September 6. 

To provide feedback on this decision on the manganese ore high grade indices, please contact [Tina Tong/Holly Chant by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Tina Tong/Holly Chant, re: manganese ore high grade indices.” 

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request. 

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.