Iron ore is one of the most widely used commodities in the world. Global production last year exceeded 2.2 billion tonnes, compared with just 90 million tonnes for copper, aluminium, zinc, lead and nickel combined.
Yet, while these five metals have been traded on global exchanges for years, the iron ore market was, until recently, rooted in a system that had not changed since the 1960s. An annual price would be hammered out between dominant iron ore producers and consumers and that price would provide a global benchmark for the following 12 months. The process worked well for decades, because there was ample iron ore to meet consumers’ needs and the price scarcely moved from one year to the next.
