Iron ore price, page-46526

Considering the big increase in IO today, I am going to have one more go at explaining why people should not use Singapore (SGX) Iron Ore Prices (or those IO prices that are commonly displayed in USD, which is typically the SGX price), as sadly todays price increase will not be reflected tomorrow - take note @1982.

Whilst IO is up 6% or so today, the SGX price shows barely no change:


Why isn't the SGX price moving?
SGX contracts are settled based on the arithmetic average for the month... this means the July price is not the current iron ore price but rather the average price for July (which is mostly known now aside from 1 more day) . Because July is mostly over, it doesn't really matter what the current iron ore price does, its very difficult to change the average price for July. For example, if Iron Ore went up 100% today, the SGX price still wouldn't change much.

What to do about this?
The best work around, if you must use SGX data is to always look at the following month. The August contract will target the expected IO price for August... but since we are not in August yet, that is essentially the expected current iron ore price. And yes, this price series does reflect todays change:



For those that insist on blindly reporting SGX data, on Monday (1st August) (or most likely Tuesday morning for @1982) you are going to see a big increase in the IO price. Why, because the stale July contract will roll-off and be replaced by the more current August contract which is already 10.5% higher.

Using the current July SGX contract is like tracking the IO price from 20 days ago.