SUBSCRIBER NOTE: Platts merges TSI-62% and IODEX price series from Jan 2018

S&P Global Platts has merged The Steel Index Iron Ore Fines 62% Fe price series (TS01021) and Platts IODEX (IODBZ00) assessment on January 2, 2018.

This merger involved changing the methodologies of both price series to align them. As a result of these changes, two identical values for TSI-62% and IODEX will be published from January 2, 2018.

Platts opened a consultation process on this proposed change on May 15, 2017 (http://plts.co/6CPr30daBrH). The topic was discussed in public methodology forums and in bilateral meetings involving stakeholders across the industry.

Feedback received during the consultation and since was positive regarding a merger and supportive of the process, roadmap and timing for the changes to be effected. Market participants requested increased visibility of the normalization process used in determining the final value during the feedback period, which Platts has addressed with more detailed information in its daily pricing rationale and elsewhere.

SUMMARY OF METHODOLOGY CHANGES: 1) TSI-62% is now published as an end-day value, timestamped to 5:30 pm Singapore time to react to intraday volatility.

This change means that the TSI-62% index is no longer calculated as a volume-weighted average.

Platts published a white paper on April 25, 2017, detailing the intra-day price movement present in the iron ore market. This paper can be found at: http://plts.co/QPWB30bFAQH.

2) TSI-62% now reflects a 2-8 week delivery window. The vast majority of medium grade fines trades observed in 2017 were for delivery between 2-8 weeks forward; TSI-62% now reflects cargoes for delivery within 2-8 weeks of the assessment date.

Furthermore, TSI-62% now factors backwardation or contango into this forward structure.

TSI-62% & IODEX take into account this forward structure by averaging the physical forward curve indicated by relevant market information across the 2-8 week delivery window.

3) IODEX specifications changed. Platts has changed the underlying specifications of the IODEX assessment to align with the incoming TSI-62% specifications so that they match from January 2, 2018. This change aligns IODEX and TSI-62% further with the most liquid iron ore brands traded on a CFR China basis.

For IODEX, this means the following specification change: Measure Previous Current Iron 62% 62% Silica 4.5% 4% Alumina 2% 2.25% Phosphorus 0.075% 0.09% Sulfur 0.02% 0.02% Moisture 8% 8% Tonnage 35,000 mt 50,000 mt The specification for TSI-62% also changed on January 2, 2018. The details for this change can be found here: https://www.platts.com/subscriber-notes-details/21314615 RATIONALE FOR CHANGE: The merger of TSI-62% and IODEX has been carried out due to market calls to remove the price difference between the two indices. These requests grew as index-linked trade became more prevalent in the spot market.

Merging the two values allows for greater certainty when converting index-linked indications (trades, bids and offers) to a fixed price basis.

Platts has started to fully reflect floating price indications in its indices for January 2018-related cargoes and beyond as a result.

In cases where an index-linked indication crosses with a fixed price indication (a comparable fixed price bid is higher than an index-linked offer for the same time period, for example), then the fixed price indication takes precedence.

For a full description of Platts assessment data hierarchy, please consult: http://plts.co/BMzV30bFAVO

Platts seeks to provide market participants with as much information as possible regarding its assessments. Therefore, in conjunction with the three methodology changes listed, a full and transparent index rationale for TSI-62% will be published, which will detail how the final value was arrived at.

In order to do so, Platts discontinued receiving submissions pursuant to TSI Data Provider agreements for companies submitting to TSI's Iron Ore indices.

Platts already publishes a rationale for its IODEX assessment --available in its SBB Steel Markets Daily publication and on Platts Metals Alert, which will be valid for the merged values.

NORMALIZATION: In this rationale, Platts will provide expanded details of the normalization process for indications used in the final value on request. Impurity penalties/premia will be determined using inter-brand differential comparisons and indications received from active market participants. Firm market indications, including transactions, bids and offers, are prioritized in this process over indicative values. TSI-branded impurity penalties/premia bands have changed to match those currently used in the IODEX assessment process.

For a full list of published impurity bands for the IODEX assessment, please consult page 8: http://plts.co/BMzV30bFAVO

Platts has also started publishing a 2.5%-4% alumina penalty band and has formalized its assessment for ores containing silica 4.5% as part of this merger process.

Medium grade fines (60%-63.5% Fe) transactional information will now form the basis of the TSI-62% index value, rather than ores with Fe content greater than 60%. TSI-62% will be published to two decimal places, rounded to the nearest $0.05/dmt.

Please submit any feedback, comments or questions to pricemethodology@spglobal.com For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.