MMTA Press Members Respond to Submitted Questions

We would like to thank the press Members for their time and detailed replies to questions submitted by fellow MMTA Members. Responses were received (in alphabetical order) from Argus Media, CRU, Fastmarkets, Metal Bulletin and Platts, and each set of responses are reproduced over the following pages.

Should you wish to respond specifically to any of the points raised, we would be happy to pass on your comments to the relevant party(ies).

Questions submitted were as follows: Please note that press Members responded to those questions they felt relevant to their particular activities:

1. How will minor metals pricing be handled, going forward, given that there is much more political and regulatory pressure on the horizon because of the issues surrounding benchmark scandals – LIBOR, gold and forex. The regulators have not got around to what they consider which benchmarks needs strong oversight – they have stopped at the major ones, such as forex, gold and oil – for now. But if they expand their scope towards some of the major minors, it has implications for publication pricing, as the costs and work needed to meet IOSCO requirements could well impact the ability of news providers to continue reporting pricing.

2. Do you see a role for the industry press in reporting on issues such as the implications of an EU Conflict Mineral Program?

3. To what extent would you cover whether the effects in the DRC region, for industry and at a political/regulatory level following the implementation of Dodd Frank? For example with regard to developments in the civil war and prosperity of the people, impacts on different types of business, success of implementation etc., whether there is any correlation known between the conflict mineral programme and the flight of people from the country? (closure of mines leading to unemployment etc.)

4. Have you done any investigations via the consortia, for example, regarding REACH and the possible creation of Cartels or similar developments regarding market concentration? How is the REACH regulation controlled by the different EU countries, and are there are there any signs of distortion of competition due to lack of control in certain EU countries?

5. There have been significant increases in subscription prices over the past 10 years and for small companies, especially those specialising in only a few minor metals, it may prove unfeasible to subscribe. What would be your thoughts on a “pay-as-you-go” or “pay-per-view” subscription for specific articles and/or prices. For example, perhaps 1 or 2 articles/quarter, or similarly for price quotes, rather than subscribing to prices if they only change very infrequently, would it be possible to pay for recent or historical prices of certain metals instead?

6. How do you go about mirroring the extremely volatile and thin market in many minor metals? Is there a danger that by cutting off ‘extremes’ in prices, even where these relate to actual transactions, you may be influencing the market rather than simply mirroring it?

7. With reference to 6, there have been concerns expressed that this may create compliance/anti-trust issues. What can be done to ensure sufficient transparency and completeness of price reporting to ensure that this does not occur?

8. There has been concern expressed about the rolling forward of prices for days where no trading has taken place, which gives the impression that there is a market where in fact there is not – is this something you could give your thoughts on?

9. When prices are reported and in some cases have moved markets down, only to find in the future this material has been rejected on quality issues, how do we know we are comparing a like for like product?

10. When material has been booked on a current average – how does this then imply the market has moved down? The average price comes from the quotes’ high and low point.

11. When prices are reported, is it possible to indicate to what extent the pricing relates to ‘dead’ market days, and what volumes have informed the price?

12. There are certain grey areas created in pricing, relating to the difference in packaging between big bags and drums (a cost differential of $0.06-$0.07/LB of Mo) and also between Mo Oxide powder vs briquettes – how might this be addressed? In the case of Fe-Ti, also, it has been suggested that more emphasis should be placed on the specifics of quality and packaging rather than on country of origin or paid/unpaid for example.
13. How do you deal with inevitable changes in personnel and train up new staff to cover these very niche materials?

Argus Media response to MMTA questions

1. Argus has been providing independent price assessments for physical energy markets for 45 years and it is pleased to be able to bring this experience and expertise as a new publishing entrant to the minor metals markets. In addition to oil, petroleum and energy markets, Argus also provides market reporting and pricing to the fertilizer, petrochemical and ferrous metals markets.As an independent publisher, Argus is free of the inherent conflicts of interest that have directly led to scandals in financial markets such as Libor. Argus has no vested interest in the level of any price that it publishes. It operates in a competitive setting where market participants have a choice of which pricing service to subscribe to.

It is important to note that benchmark scandals have been in financial markets rather than physical commodity markets, reflecting the strength of independent price reporting in physical markets.

Argus has consistently been at the forefront of best practice in commodities price reporting. It has invested heavily in its operations, compliance and controls framework in recent years. This including rigorous internal, and for some prices external, auditing. Its reporting of key benchmark prices has been fully compliant with the principles for price reporting agencies (PRAs) set out by the International Organization of Securities Commissions (the Iosco PRA Principles), since their development in 2010. Forthcoming EU regulation on benchmarks is expected to fully reflect these Iosco PRA Principles.

In line with the Iosco PRA Principles, Argus completes annual external assurance reviews of its energy, petrochemical and fertilizer price benchmarks. These reviews are conducted by independent professional services firm PwC. Non-ferrous metals price reporting regularly completes rigorous periodic internal audit by the Argus internal compliance team as part of the internal process of alignment with the Iosco PRA Principles.

Argus encourages all market participants to engage with its editorial price reporting team regarding their activities in the market, to ensure that Argus can provide the most reliable and robust prices needed by the industry. This voluntary flow of information to PRAs is crucial to the price reporting process and the efficient functioning of physical commodity markets, a point acknowledged by regulators.

2. As an independent reporting agency, Argus is ready to report all stories of relevance to the markets it covers. The Argus approach is to report and analyse the implications of the story to the market in terms of supply-demand fundamentals and spot prices.

3. This is certainly a story that we monitor and report on, with a clear focus on its impact on the market and on prices.

4. REACH is an evolving story and one which our reporting team monitors, with a focus on its impact on market fundamentals and on spot prices.

5. Argus is investing in its metals services and its new products — Argus Minor Metals, Argus Ferro-Alloys, Argus Rare Earths, Argus Steel Feedstocks and Argus Black Sea Steel — provide specialist in-depth information and robust price assessments. But pay-as-you-go is not the current business model. Argus is pleased to be a new publishing entrant to the metal markets, and to provide greater competition among price reporting agencies and improved choice to subscribers and potential subscribers.

6. Argus has vast experience in reporting thin and illiquid markets, and its methodologies set out in detail the criteria for the identification and treatment of prices and trades that appear to be out of step with the wider market. All Argus methodologies are freely and publicly available on the company website. One of the key tests undertaken by Argus reporters during the price assessment process is whether a trade or price is repeatable in the spot market. Trades which are subject to special premiums or specifications linked to a term contract, for example, would fail this test. Genuine spot price volatility is reflected in the low-high range of the price assessment. For example, a particularly low price which is repeatable in the spot market and not tethered by any special conditions could be included.

7. Argus methodologies set out in detail the process for testing trades and prices against wider market conditions and establishing repeatability. At the same time, Argus has strict rules to ensure that all confidential information gathered or reported to it is protected and not disclosed. These commitments are set out within the company’s Editorial Code of Conduct and its Global Compliance Policy, both of which are published on the company website. In line with the methodology, Argus reporters have a responsibility to gather information from as many sources as possible. All companies providing information to Argus can be reassured that Argus’ published prices are never set by a single source or piece of gathered information, so there are no anti-trust issues in reporting information to Argus. This is especially the case given Argus’ fully independent role in publishing price assessments reflecting prevailing spot market price levels.

8. Argus assesses prices twice a week in a process based on a hierarchy of information, as set out in the public methodology: Verified spot trades; bids and offers; a survey of where market participants think the metal would trade if business were to be concluded. Other factors, such as associated raw-material costs and other parallel markets with greater liquidity, will be considered when there is no spot business to take into account.

During periods of low liquidity and no reported spot business, Argus continues to assess the market and adjusts prices where appropriate. This approach captures the often gradual convergence of buyers and sellers’ views over time, and eliminates the artificial volatility that can occur if prices are moved only on the basis of reported trades. This is a tried and tested approach to producing reliable and representative price assessments that, among other benefits, help participants to track their exposure during periods of low liquidity.

Links to Argus Methodologies:

http://www.argusmedia.com/~/media/3D4A6B9C85DB43FAA2713DB25018487D.ashx

http://www.argusmedia.com/~/media/15B0157FA859463682D51D1050F0C8B1.ashx

http://www.argusmedia.com/~/media/B79E8143A6564655AC4792B95814362C.ashx

9. If a transaction is entered into on the basis of a specific quality, then the price assessment process considers that quality in identifying the price. Subsequent rejection of the material on quality issues does not alter the assessment made on the day of publication, because the assessment process is carried out on the basis of the specified quality. The trade and price involved would have undergone the usual Argus tests to check its relevance to the spot market assessment.

10. Argus assessments are based on arms-length spot transactions and not on trades with special conditions attached, such as contract formulas and term contracts. A spot trade priced at the previous assessment’s mid-range price could, if verified, be taken into account but would not necessarily form the high or low of the new assessment.

11. Argus’ minor metals methodology does not currently include the publication of verified trades taken into account when assessing spot prices. In some other commodity markets, Argus does publish anonymised trades with volume and prices and, in some markets, Argus publishes full transactional information including the named buyer and seller. Sometimes this information is published on online bulletin boards. Some markets accept this practice and the greater transparency it brings. Argus is committed to providing transparency to physical markets and would definitely consider the publication of concluded minor metal trades if consultation with the market showed sufficient support for it.

12. Argus constantly strives to keep its methodologies relevant and welcomes all feedback from the market. Feedback is fed into a clear process involving transparent consultation with the wider market before the implementation of any changes to the methodology.

Spot markets sometimes require a degree of normalisation in order to capture sufficient liquidity, a process that Argus documents in its methodologies. These are all freely available on the company website.

13. Argus is remarkably good at retaining staff, giving it continuity and a highly experienced editorial team. This is part of the company’s competitive edge and one of the reasons why firms are increasingly switching to Argus as their preferred supplier of independent pricing information.

The Argus minor metals reporting team includes some reporters with more than a decade of relevant experience. Argus has Investors in People (IIP) accreditation, reflecting the company’s commitment to the highest standards in staff recruitment, training and development.

Argus recognises the importance of maintaining the high quality of its price reporting during occasional changes in personnel. Recruitment of new market reporters involves a rigorous assessment and interview process followed by a training process that is laid down within the compliance structure and fully documented by senior editors. Argus’ editorial training places a strong emphasis on understanding and consistently applying methodology, as well as on identifying and understanding the specific factors driving prices. All new recruits attend an in-depth Argus induction course.

Before starting to undertake price assessments, new reporters shadow experienced reporters for up to six months, depending on the market being covered. The trainee will produce shadow assessments, for internal use only, and discuss the process he or she has gone through to arrive at these prices. In addition, new reporters are taught about their market by experienced supervisors, with an emphasis on supply-demand fundamentals and other price drivers such as end-use applications and regulation.

In order to progress, new reporters have to complete a six-month appraisal, which includes a written test on methodology and compliance.

Fast Markets response to MMTA questions:

1. IOSCO compliance, if it were to become mandatory, would increase costs for smaller agencies, who would have to consider whether to continue offering minor metals pricing. There is a significant five-figure sum involved—regular auditing, etc, as well as ensuring adequate legal protection. Fastmarkets has a team of several people handling non-ferrous physical premiums (LME metals), and is moving towards IOSCO recognition.

The bigger pricing providers have the financial capacity to roll this out to minor metals and rare earths. But the danger is there will be fewer independent price discoverers if smaller providers are not able to follow suit. There is also the possibility that regulators decide minors would need to have an auction process, like gold, silver and the PGMs. In that case, pricing would have to migrate to another platform by the likes of Thomson Reuters, the LME or ICE, who handle (at a cost) the others.

4. REACH seems to be an information platform – costly for the minor metals trade, but it is not leading to cartels that influence business to the extent of monopolistic practice.

5. 5. If prices move away from publications to platforms (see 1), it will cost users even more to access the data they need. There have been protests about passing on costs for the gold, silver, platinum and palladium fixes.

6-12. These are issues that may come under regulatory scrutiny. This type of pricing is not something that Fastmarkets is expert in, but it does seem that it will make it more cumbersome and costly for those PRAs (price reference agencies), who are engaged in this type of pricing activity.

13 – There may well be a generation retiring soon, but often a newer, younger influx adapts to inevitable changes in business and trading patterns – witness social media. Personally, I don’t think there will be a succession issue..

Metal Bulletin response to MMTA questions:

1. Metal Bulletin has already carried out most of the necessary work to align its prices and pricing procedures, including minor metals and alloys prices, to the IOSCO principles for price reporting agencies. The investment in staff and technology this work has entailed is central to the future of Metal Bulletin, which is committed to producing free, independent reporting on prices and markets. Market participants recognise the value of the work we have done in this area, which enhances our capacity to report prices rather than diminishing it.

2 & 3. Metal Bulletin has covered the debate on how to legislate on conflict minerals, including whether there should be greater regulation and whether this should be mandatory, and how this would affect metal markets. This has included the responses from interest groups like Global Witness and EU parliamentary figures such as Iuliu Winkler.

As the debate has progressed, and following the introduction of mandatory certification, Metal Bulletin’s coverage has also looked at the practical implications of conflict minerals law: the assistance available in understanding the EU legislation to importers of 3TGs, and how the ruling could affect imports, smelters and refiners.

Our primary focus is on markets, but obviously in writing about mine closures, for example, we discuss the impact on employees: witness our reports on Glencore’s recent moves to shut copper production in Africa, in which we discussed the effects of care and maintenance programmes and employment contracts on workers affected by the closures.

Trade MEPs call for more clarity about EU plans on conflict minerals (November 2014)

http://www.metalbulletin.com/Article/3398672/Trade-MEPs-call-for-more-clarity-about-EU-plans-on-conflict.html

CONFLICT MINERALS: Iuliu Winkler speaks on planned EU legislation after Global Witness criticisms (April 2015)

http://www.metalbulletin.com/Article/3446274/CONFLICT-MINERALS-Iuliu-Winkler-speaks-on-planned-EU.html

CONFLICT MINERALS: Global Witness, Amnesty International applaud call for tougher law from MEPs (May 2015)

http://www.metalbulletin.com/Article/3455694/CONFLICT-MINERALS-Global-Witness-Amnesty-International.html

CFSI ‘ready to help’ companies with requirements of planned EU conflict minerals law (May 2015) http://www.metalbulletin.com/Article/3457610/CFSI-ready-to-help-companies-with-requirements-of-planned.html

4. When the Reach legislation came into force, and was at the forefront of the market’s attention, MB wrote about it frequently and in depth. If anybody has information about cartel concerns, we’d be very interested to discuss them.

5. There is internal and external interest in metered access, and it’s something Euromoney Institutional Investor, the London-listed company that owns MB, is looking into. MB already enables subscribers with a particular interest to tailor website, prices and emails to reflect that interest. Price feeds alone are also available.

6. Metal Bulletin’s pricing methodology aims to produce representative price assessments of the market it covers. The methodology provides reporters with criteria to deal with ‘extreme’ prices. ‘Extreme’ prices are considered outliers and discarded when the price is questionable (e.g. we don’t receive a proof of contract upon request), or the deal has been made on terms different from our specification in a way that defies ready normalisation. At times of extremely volatile markets, we would produce our assessment taking the volatile circumstances into account with the aim of producing a representative assessment of the market.

7. Our methodology and price specs are publicly available to meet IOSCO requirement of sufficient transparency. We are excited by the response of the market to our trade logs (which detail prices, volumes and locations of transactions, bids and offers without naming participants in the deal) and want to continue to put out trade logs for minor metals and alloys. The numbers we receive from the market are taken in good faith, and there is an audit trail. And, of course, we’re happy to discuss the best way of receiving transaction data from the market to make sure we can provide as much transparency as possible.

8. Metal Bulletin’s pricing methodology gives greater weight to actual transactions, but also reserve the right to reporters to use bid/offer information as well as indications or assessments by market participants in periods of low liquidity. If no transaction has taken place we don’t simply roll forward the price but produce our assessment based on other information, i.e. we still talk to the market even if no deals are happening. We only roll over the price in case of bank holidays providing in advance a notice to subscribers. On another level, it’s important to note that the price assessments that we publish arguably have greater value in periods of low liquidity than high.

9. Our policy for price corrections allows for situations in which price data that subsequently turns out to be erroneous has been included. In a scenario like the one described we would go back, review the published price and see whether the new information should cause us to change it. Obviously we would issue pricing notices to inform the market about what was going on.

11. In some of the larger markets, MB publishes trade logs to give people more of an indication of what is underpinning the price assessment. As discussed earlier we would like to publish more. Conversely, it has been suggested that in the case of very small markets providing detailed trade logs might allow parties to be identified.
12. On the first question, MB’s quotation for moly oxide stipulates drummed, so if material is in big bags, we would ask for a net back to our requirement. The quotation is also specifically for powder, not briquettes, so while we might pick up some data for briquette prices, that wouldn’t be used in setting the quotation. It’s possible to net back on repacking, but briquettes are really a separate material. Occasionally, powder and briquette prices do fall in line with each other, but usually, it’s understood that there’s a premium for briquettes.

The published specs are here. http://www.metalbulletin.com/Article/3209142/Search/PRICING-NOTICE-Metal-Bulletins-European-molybdic-oxide.html?PageId=196010&Keywords=pricing+notice+molybdic+oxide&OrderType=1#axzz3lA7LmTjX

For ferro-titanium we do take specifics of quality and packaging into account. Our specification stipulates that we price standard lumpy material, so if that’s not what’s been sold, then we’ll either discard the price point (e.g. if it’s 0-2mm material) or ask for an explanation of how any differences in chemical content affect the price (e.g. low oxygen, low vanadium, low aluminium). That will be taken into account and noted in our pricing database Mind when setting the price.

In terms of packaging, a similar principle applies: if the material has had to be repacked (which it sometimes does if a producer buys in extra to make up shortfall in an order), then we’ll ask how much that added to the cost and take that into account. I don’t think it’s right to suggest that this should have more emphasis than country of origin or paid/unpaid, though – those factors can make a big difference. For example, it’s widely understood that Russian material, issues of quality aside, is often sold at lower prices because it’s cheap to produce, readily available and the rouble/dollar exchange rate has also been favourable. It also carries a duty, so if that’s excluded, it knocks 2.7% off the price.

13. All new staff who will be reporting on minor metals and ferro-alloys undergo an induction on materials, markets, pricing and reporting when they start at MB, which includes formal training on pricing. Over the past five years, however, we have developed a cadre of senior journalists who can support newer team members. At present every member of the editorial team in London has specific experience of pricing either minor metals or ferro-alloys, or both. All our prices prior to publication undergo a peer review process, which ensures that reporters are also familiar with other markets than those they currently price.

Platts response to MMTA queries:

1. Platts tracks and keeps records of its assessments, including those used in the settlement of financial derivative contracts and therefore categorized as “benchmarks” for purposes of the IOSCO Principles for Oil Price Reporting Agencies (PRA Principles) and similar purposes.

In 2013, Platts announced it would voluntarily apply the IOSCO Price Reporting Agency Principles to its non-oil benchmarks in power, petrochemicals, metals and agriculture and therefore include those assessments in the annual independent assurance reviews of its alignment to the Principles. In 2014 Platts engaged a major accounting firm to conduct an annual independent assurance review of its non-oil alignment to the Principles. The review was completed in February 2015 and, included a comprehensive review of Platts’ documentation of its processes for price assessments used for power, petrochemicals, metals and agriculture in Houston, London and Singapore as at 28th February 2015.

The reasonable assurance review for non-oil demonstrated Platts’ alignment to the PRA Principles. You can read the press release through this link

http://www.platts.com/pressreleases/2015/042215/no. We can also make the E&Y report for non-oil commodities available to you should you require.

2. There is clearly a role for the industry press in reporting on such issues. Platts as an organization produces both industry news and price information, but from a market perspective, in regard to the importance of wider societal issues, the primary concern for a pricing organization needs to be how the issue impacts pricing.

3. As above, our primary focus in covering these and similar issues would be to track their impact on the market. For example, in the case of conflict minerals legislation, the implications in terms of supply and thus potentially on pricing would be of direct relevance to the price assessing process.

6. Platts’ minor metals assessments use a survey methodology. For such assessments, Platts collects a wide variety of transactional and market information through a survey of relevant market participants. Platts market reporters will call market sources through the course of the day and week to gather as much information on the relevant and related markets as possible. Platts seeks to receive market information from as broad a cross-section of the market as possible.

Platts seeks to collect and analyze as much information as possible in survey markets, including bids, offers, interest to trade, transactions that have been previously concluded, and indications of value from participants in the market, and encourages market participants to provide all relevant information. It should be noted, however, that market reporters may not be able to establish every detail of each dimension of a trade.

Platts aims to include data of the highest quality in its price assessments. Platts’ assessment guidelines are designed to avoid any distortion of the final price assessment; therefore, inputs that are not fully verifiable may be eliminated and “one-off” or unrepeatable transaction data may be disregarded from the price assessment process. Platts first considers fully transparent and verifiable data, and gives less consideration to data as its transparency and verifiability wanes. That said all market information is welcome and may be useful in informing Platts about its price assessment process, even if particular data is excluded from the price assessment process itself.

A key Platts editorial principle is for the price data received to meet a repeatability test. Platts will ensure that the price reflected in its assessment is a re-peatable market price as opposed to an outlier relevant only to a counterparty or a subset of the broader market. As a note, an outlier transaction could result from a number of circumstances including special trade agreements or embedded options, which make the specific circumstances of that trans-action unique and therefore not repeatable by others in the marketplace for the given commodity.

7. Platts specifies that transactions reported must be at arm’s length and not conducted between corporate affiliates. Platts routinely reviews companies participating in its price assessment process. These reviews aim to ensure the suitability of data and information that are used to formulate Platts’ price assessments and indices. Platts has developed guidelines for Management of Sources that address source identification, source evaluation, source development, using source information and source dependency. Platts records non-arm’s length relationships that companies may have with associated entities. Additionally, Platts expects its sources to comply with their internal policies, including those regarding affiliated-entity transactions.

More broadly, Platts understands that market participants will independently structure and enforce their own compliance requirements and Platts meanwhile will continue to report on its portfolio of commodities and markets while adhering to its own transparent and orderly editorial processes. Front office market sources are often well informed on market and price activity since these individuals are actually transacting. Nevertheless, Platts will also talk to middle office staff. No source is categorically eliminated from the collection of market information as a matter of Platts policy. Platts will also contact PR and compliance departments to gather relevant market information.

8. As noted in the response to question 6, Platts seeks to collect and analyse as much information as possible in survey markets, including bids, offers, interest to trade, transactions that have been previously concluded, and indications of value from participants in the market. While minor metals and ferroalloys markets can be illiquid, with a limited number of transactions taking place, we believe that there is sufficient information available in the marketplace to form a realistic assessment of the tradable value of the commodity in question.

9. As noted, Platts’ reporters are trained to seek a wide variety of information to test reported transactional activity, including the specific price agreed, the counterparty to the trade, the point of origin and destination for delivery of the commodity, the size of the transaction, any physical quality commitments agreed as part of the trade, the terms and conditions of a trade and when a trade was agreed. Platts aims to include data of the highest quality in its price assessments. Platts’ assessment guidelines are designed to avoid any distortion of the final price assessment; therefore, inputs that are not fully verifiable may be eliminated and “one-off” or unrepeatable transaction data may be disregarded from the price assessment process.

While Platts has an exceedingly low correction rate for its price assessments, corrections are inevitable given the sheer volume of information we publish. We issue corrections for price assessments as soon as discrepancies are identified, but only when a technical error has affected the price, or when a correction is issued by a third-party data source. Platts does not issue corrections to published price assessments to reflect information that may become available after publication.

12. Platts regularly normalizes disparate information from the diverse physical commodity markets back to the standard reflected in Platts’ price assessments. This is done by analyzing quality premiums (for quality differences), the movements of all markets through time (for time differences), and other premiums associated with the size of trades, delivery terms, packaging etc.

In the case of moly oxide briquettes, there is typically a premium associated with briquettes compared to moly oxide powder. This is a fluid number however, and does not simply reflect the cost of briquetting, so the process of normalization would include gathering information from the market on the prevailing premium levels on any given day.

As far as the question of quality and packaging as against country of origin and duty status, Platts continually checks its price assessment specifications to ensure they remain relevant and fit for purpose, and welcome market feedback. We also have defined processes in place to manage any amendments that are made.

13. All Platts market reporters are trained to analyze the data they receive and to question sources to establish the fullest set of information possible around transactional data. This training, which includes a full Basics of Market Reporting course completed by every market reporter when they start with Platts, highlights the importance of seeking confirmation of all dimensions of trading activity, even those that may not be reported in a survey environment on first contact.

Reporters are trained to seek a wide variety of information to test reported transactional activity, including the specific price agreed, the counterparty to the trade, the point of origin and destination for delivery of the commodity, the size of the transaction, any physical quality commitments agreed as part of the trade, the terms and conditions of a trade and when a trade was agreed.

Market reporters also have designated back-ups in place to ensure continuity of market coverage; reporters are trained to adhere to the published Platts methodology and have a range of in-house documentation available to guide them through the pricing process.

CRU response to MMTA questions:

1. CRU believes the IOSCO principles represent current best practice in price assessment. CRU implemented this standard in July 2014, and it applies to how CRU provides all price assessments. With internal audit programs, CRU ensures its price assessment methodology, data and content controls, and reporting are validated and meet the standards outlined by IOSCO. In this fashion CRU assures its reporting and prices are fair, independent, and transparent; clearly reporting the market rather than seeking to set the market. In this fashion, CRU remains a service to the metal, mining and fertilizer industries.

2. Yes, any potential conflict mineral program would have direct implication on trade flows. The potential impact on prices and supply/demand fundamentals could be extensive. Therefore, proper reporting of trend, prices, and market manipulation could highlight the need for future legislation and governmental interventions.

3,4,5. CRU understands the balance of providing the market with the necessary forecasting, market intel, and individualized consulting programs, while ensuring customers’ budgetary requirements are met. CRU has recently enhanced the flexibility of how we provide our subscriptions. We now offer a broad prices service, and companies can pick and choose which groups of prices they need and the news stories that provide added depth and context. CRU is willing to work with individual subscribers to find a solution to the business intelligence they require while providing company-wide licenses to provide added flexibility.

6. CRU monitors the market by engaging in price assessment across end users, traders, agents and producers in the US, Europe, and China. We have broad connections across these markets, which ensure that we capture the majority of transactions. Each transaction in the market is viewed in context with the rest of the global market. One aspect which differentiates CRU is that we only report on validated market transactions. We do not allow inter-trade business and bids and offers to influence the market price, as that could allow manipulation. While quotes and offers are not used for index price assessment, they do provide context for the market movement.

7. CRU believes the IOSCO principles represent current best practice in price assessment. CRU implemented this standard in July 2014, and it applies to the CRU prices used in the settlement of financial instruments. With internal and third-party audit programs, CRU ensures its price assessment methodology, data and content controls, and reporting are validated and meet the standards outlined by IOSCO. In this fashion CRU assures its reporting and prices are fair, independent, and transparent; clearly reporting the market rather than seeking to set the market. In this fashion, CRU remains a service to the metal, mining and fertilizer industries.

8. This is often the case when market liquidity drops and spot interest fails to materialize. In addition to transaction details, CRU collects market commentary to shed light on the direction of the market in absence of verifiable spot deals. Some price assessment services take into account quotes and bids when market liquidity is not present, but CRU ultimately feels that this could open the market to manipulation. CRU’s robust methodology and specifications do not allow manipulation. CRU publishes detailed and comprehensive documents which set out the methodologies used by all of its products to assess prices, and the definition of each of those benchmarks. These are publicly available from www.crugroup.com. These documents define each price and the overall methodology used and the criteria for including and excluding submitted data.

9. CRU fully qualifies all transactions prior to including them as index modifiers. Material specifications are one area we highlight and ensure the trades are compliant. CRU believes that it is more important to get the price correct, than so simply move the index to make news. That is why we employ price analysts to perform the market assessment as opposed to reporters.

10. Rarely does a single transaction affect a price point. An average is based on two corresponding figures, low and high. Thus a transaction could be reported at the current average; however, if supporting tractions have been placed below the current low or above the current high, the index would potentially move accordingly. Thus it is imperative that a prices assessment process include a vast number of market contacts to ensure all spot business is captured.

11. CRU endeavours to highlight in the editorial content the reasoning for prices changes or static trends. That includes the transactions and volumes that have affected potential changes or why prices have not altered. CRU believes that it is more important to get the price correct, than so simply move the index to make news. That is why we employ price analysts to perform the market assessment as opposed to reporters.

12. These questions are not limited only to moly or FeTi, as most, if not all ferrous and non-ferrous products have varying transactional needs/requirements in different regional industries and markets. Consequently, CRU believes it is of utmost importance that subscribers and market players are fully aware of price assessment methodologies and specs in order to validate the basis for each price point. Consequently, CRU has taken a strong stance on specs in order to align all transactions. As a result CRU add/subtracts, when necessary, cost differentials on packaging, logistics and material

13. CRU believes that it is not only important to train personnel in market fundamentals, but also the IOSCO principles. The IOSCO principles do not define what would constitute possible “material conflicts of interest”. CRU defines a conflict of interest in two ways:

-As part of their employment contract, a price assessor must declare employment with companies or organisations in the relevant marketplace – if CRU believes there is a risk of influence over a particular commodity’s price in return for financial benefit or career advancement, CRU would prohibit it

-As part of their employment contract, a price assessor is forbidden from actively speculating on commodity price futures because they have a financial interest in a particular commodity’s price

In both cases this applies to full time employees or contractors involved in price assessment. This is overseen by CRU’s HR function and the specific oversight function provided by the Company Secretary. The IOSCO principles state that price reporting agencies should “ensure…adequate supervision and sign off by authorised or qualified employees prior to releasing benchmark determinations”. All CRU prices are authorised by someone other than the original assessor before publication.