American Metal Market Methodology The Process Behind Our Pricing
Brands The original metals price reporting agency since 1882 with more than 1200 proprietary price assessments in 25 regions across North America Global Price Reporting Agency with over 950 proprietary price assessments covering every major trade region Research and consulting business providing a series of short-term and long-term forecasting services to our pricing Page 1
Mission Statement The Metal Bulletin Group aims to provide leading pricing intelligence, including independent industry benchmarks, for the metal and mining industry. The group s global portfolio of news, analysis, conferences and insight services complement these price benchmarks. Page 2
Global Price Reporting Network The worlds largest dedicated metals price reporting team with offices in London, New York, Pittsburgh, Shanghai, Hong Kong, Sao Paulo, Melbourne, Singapore, Mumbai, CIS, Istanbul, and 5 other US locations (including Chicago). Page 3
How are AMM prices used? Price benchmarks for contracts Inventory valuation purposes Price Discovery Internal sales & purchasing performance evaluation Market trend analysis Page 4
AMM as a Price Reporting Agency The Metal Bulletin Group, which includes American Metal Market, is a leading price reporting agency (PRA) and intelligence provider for the metal & mining markets. Our market reporters assess over 2000 non-ferrous, ferrous, raw material and non-metallic mineral prices, many of which are the industry standard benchmarks, trusted and used across the industry supply chain. Breadth and depth of metals and minerals expertise and coverage Impartial and independent PRA which engages with all sides of the market Highly developed skills and processes in assessing prices and calculating indices Independent and transparent methodologies and price specifications Unique systems and technology infrastructure to ensure data integrity Pricing practices aligned to core IOSCO principles Our assessments and indices are used by our clients for contract pricing and internal applications The world s major exchanges (e.g. SGX, CME) use our prices to settle financial and risk management contracts Under a data licence agreement we are able to supply our data as direct feeds (XML, API) or via thirdparty vendors Page 5
How do we assess prices? Two methodologies Indexes and Assessments Indexes: single number, a volume-weighted average of transaction data. Methodology generally employed in comparatively liquid market. Assessments: the bulk of our prices; they can be a single number or a spread/range of reported representative business Both methodologies aim to produce an independent and transparent price reference representative of where the bulk of the SPOT market is Page 6
How does AMM serve the spot market? Derivatives Our objective when we assess the market is to produce prices representative of what happens in the spot market. F Long-term contracts Spot Spot markets influence the rest of the market despite being a fraction of the whole traded volume Page 7
The Assessment Methodology Data collection is more than simple data gathering data collected must match our required price specs. Key questions that reporters ask to understand and analyze the context around a deal: What price? What volume? What material? What delivery terms? Any special terms? Who with? Page 8
The Assessment Methodology Price Discovery Process 1 2 3 Data Collection Data Analysis Assessment Produced Canvassing the market to collect data points spot deals, bids/offers - from market sources. High quality PRA s will have a wider net of contacts from which to draw to collect data points AMM s Code of Conduct ensures integrity through this process Data is analyzed, if required normalized. Outliers are removed. The AMM editorial team act as quality control for the data collection process AMM s database enables fully auditable analysis of data Greater weighting on transaction data, bid/offers, deals heard, market participants indication of value Context of deal is important Assessments are peer-reviewed - Before an assessed price is published in AMM it has been reviewed by no less than 2 members of editorial, including a senior member of the team. Page 9
The Assessment Methodology Price Discovery Process Peer review and editor s sign-off to ensure adherence to methodologies and rigour 1 st market reporter collects market data, analyses and sets the price. 2 nd market reporter peer reviews the data, notes and the set price. Approves/reject; sends form to the Editor. Editor s final review; if all is OK the assessment is signed-off for publication Page 10
How does AMM serve the long-term contract market? Assessed prices can be used to trigger escalation/de-escalation clauses in contracts to protect counterparties engaged in long-term contracts from market volatility. Page 11
Market Specifications Currency Unit of measure Location Incoterm Source Launch date Frequency Page 12
What are the IOSCO Principles? IOSCO Principles for Price Reporting Agencies The Principles are best practices on: Governance and oversight Quality and integrity of the methodologies Accountability and Audit Page 13
How does AMM align with the IOSCO requirements? A strong Code of Conduct, policies and reporters training to ensure we act with knowledge independence, impartiality and integrity. All methodologies are published to ensure our price reporting process is fully transparent to stakeholders (subscribers, market participants and regulators) All changes to methodology and/or price specification are implemented only after have sought and considered market participants views and feedback A fully auditable process developed following the IOSCO requirements Page 14
Complaint Policy If you wish to raise an issue, there are several avenues through which to voice your concern: Routine inquiries through the market reporter Escalation to an AMM Editor Escalation to Corporate Personnel via a Formal Complaint details of how to file a formal complaint are available on AMM.com/pricing/methodology Page 15
Thank you and questions We invite you to participate in the price discovery process by becoming a data submitter. Email editor@amm.com to ask for a copy of our data submitter policy. My contact: Michael Cowden, correspondent, steel 774-643-1244 mcowden@amm.com For information about AMM licenses, please call 877-638-2856. Page 16