Price indices entirely based on real transaction data
Metalshub, the digital trading platform for metals and ferroalloys, has launched its first price indices, signaling permanent change for the market and the way ahead for price discovery in the sector. Price opacity has long been the bugbear of those trading ferroalloys and specialty metals, with the market retaining this feature despite the best efforts of the price-reporting agencies (PRA).
Metalshub has started to publish price indices from 5 November onwards for a variety of ferroalloys, namely Ferrosilicon, Ferrochrome, Ferromolybdenum, Ferrovanadium, Ferromanganese and Manganese Metal. The six indices will be the company’s first move into the price data arena and are expected to be added to in time. The volume-weighted price data will be made available to platform members and subscribers at a fraction of the fees charged by PRAs to customers using indices in term contracts.
The Metalshub indices are revolutionary for the ferroalloys and specialty metals market in that they are based exclusively on real negotiation and transaction data rather than a blend of journalistically reported trade and bid/offer indications.
The benefits that the indices will bring to the market are made possible by the strong trading liquidity that the Metalshub platform has generated since going live in 2017. The marketplace features a list of around 1,000 member companies and generates more than 900 bid/offer data points per month. The value of legally binding contracts concluded over the platform grew by a factor of five to around EUR 100m in 2019 and is on a strong path towards doubling to EUR 200m this year despite the market disruptions caused by the COVID-19 pandemic.
More accurate price indices will bring significant change to the market. Suppliers and buyers negotiating annual contracts will for the first time be able to use the most accurate indices, and spot market participants will have access to the most recent price information.
All market participants perform market analysis before making decisions. The Metalshub indices will allow buyers and sellers to make better trading decisions because they will have access to prices without the time lag that results from the manual data collection approach of the PRAs. The elimination of lag will have a profound effect on trade outcomes, as even small deviations from anticipated short-term trends can have a significant impact on profit and loss. Transactional platform users are already able to assess trade performance with the integrated Analytics Centre, where transactions can be benchmarked against index prices.
The Metalshub indices will disrupt the traditional route to price discovery, but the company is keen to highlight that the launch is a natural consequence of its broader vision and success.
We want to change the industry for the better and we believe that digital transformation is the way to do this. Metalshub is more than a platform – it’s a mindset and a movement. It’s about people and the way people work.
Dr Sebastian Kreft, Co-founder of Metalshub
The offering of fact-based price data is therefore a natural extension of what the company was created to deliver.
We provide digital tools which offer a clear value add. They boost business because they make it more efficient and reduce risk. This is about enabling people.
Dr Sebastian Kreft, Co-founder of Metalshub
