Why is iron not traded on the LME?

[rustyheela]

Could anyone briefly explain how come iron is not traded the same as other commodities? or is it? or is it just the case of xxx company requiring x amount of tonnes and they just go straight to the supplier?
Thanx

 

[bvbfan]

Iron is not traded because there are various forms of iron.

Also iron is used in steel manufacturing and is bought as iron ore which is then used to make steel.

If you research iron and iron ore on google or wikipedia it might help

 

[waz]

Just another thought.

Its too difficult to stockpile iron ore, it takes up a large amount of space, and won't it oxidise after some time?????

So there is no point in having spot market for it. Besides, what steal company would rely on gaining their supply from the spot market. Its not like they would only buy a couple of tonnes at a time, they need millions of tonnes. When your buying millions, you will get a cheaper price, and provider has certainty on their cash flow.

 

[llpsmith]

Hello

The answer is that until recently, the majority of iron ore sales were governed by a benchmark price system agreed annually between producers and European, Japanese and Chinese steelmakers.

The rise in the freight market increased the delivered cost of iron ore (and the commodity price spike of 2008 didn't help) and meant that BHP, Rio and other Aussies - as well as Brazillian ore exporters increasingly wanted to trade spot, medium-term and unpriced or index-priced contracts.

But you can trade iron ore OTC for physical delivery and more importantly you can trade a cash-settled swap with central counterparty clearing. The market is very Asia focussed because of China's iron ore imports and is becoming very liquid with a lot of depth.

For more information call Gabrielle Richou at Freight Investor Services in Singapore +65 653 55 189 or Lee Taylor in London +44 207 090 1120. See: freightinvestorservices.com/iron_ore_swaps

Neville Smith
On behalf of Freight Investor Services

 

[Richard Dale]

Note that the London Metals Exchange does trade steel (which is mostly iron) in the following forms:
Far East Steel
Mediterranean Steel

Re Oxidisation of Iron as previously mentioned, Iron Ore is oxidised iron. It doesn't "rust" any more than its ore form.

Typically mines store the iron ore in pellet form in huge heaps before shipping to someone who wants to refine it into steel:
http://en.wikipedia.org/wiki/Iron_ore

 

[kenny1703]

Note that the London Metals Exchange does trade steel (which is mostly iron) in the following forms:
Far East Steel
Mediterranean Steel

Re Oxidisation of Iron as previously mentioned, Iron Ore is oxidised iron. It doesn't "rust" any more than its ore form.

Typically mines store the iron ore in pellet form in huge heaps before shipping to someone who wants to refine it into steel:

I agree with you, Richard!