What is Platts Iron Ore Lump Premium
The Platts spot iron ore lump premium assessment (IOCLP00) is of the premium a lump cargo commands over the price of fines as defined by the Platts 62% Fe Iron Ore Index, or IODEX. This premium is assessed on a US dollar per dry metric ton unit CFR Qingdao basis, which is applied over the IODEX assessments.
In August 2017 Platts increased the frequency of the lump premium assessment to daily from weekly to reflect the heightened liquidity in spot trade of lump products.
The lump premium assessment specifications reflect the type of lump material that possesses the most liquidity and is most commonly traded in the spot market, like Pilbara Blend and Newman Blend lump. The reason lump material is typically able to command a premium over fines cargoes is because lump can be directly applied to blast furnaces with the exception of certain non-screened brands, while fines material has to undergo the process of sintering before being used.
Since the start of the spot lump premium assessments in May 2013, there has been a discernible increase in transparency among industry participants and more openness in sharing transactional data.
Besides spot transactions, the assessment has also been used by miners, steelmakers and traders globally to price longer-term contracts.
The lump premium is also the basis of derivatives like swaps, which are generally settled against the monthly average of Platts spot assessment.