Farewell to EQB

On Monday, Merafe Resources (a 20.5% FeCr joint with venture with Glencore in South Africa) has announced its termination of European Quarterly Benchmark from June 2024.

This decision was based on the fact that Benchmark became less relevant for market participants and did not satisfy fully market needs and requirements. While there were discussions about its structural imperfections for years, it was equally a very significant part of the market landscape

Now that Benchmark has been discontinued, the question remains as what could replace it and how fast the industry could adapt to new realities.

Current pricing mechanisms include:

· Bidding Price – applied for HC, LC and Ch Cr in China. Announced monthly by the major stainless-steel producers in China. While the price is announced, other very significant details such as number of competitors, individual discounts, or incentives, as well as total tonnage in some cases remain undisclosed. Thus, transparency is limited. In addition, the price is set up between state-owned companies, which also makes it less relevant to the rest of the market.

· Survey Pricing – applied for HC/LC FeCr. Provided by publishing agencies, which are recognized throughout the market. Based on weekly gathered information from market participants, while total amount of assessed deals is much lower than total market, due to fact that more than 90% of the deals are conducted by formulas. Often used as a basis for contractual formulas.

· Spot deals concluded offline/online. Confidential price agreed between seller and buyer at the time of their inquire, offline or via online negotiations. This approach lacks information about total tonnage, number of competitors, guaranteed feedback, and results of negotiations in some cases, together with absences of liquidity and transparency. Thus, this could hardly be considered a relevant market indicator. Sometimes used for survey pricing.

Unfortunately, none of these mechanisms can fully solve the underlying problems for ferrochrome pricing. While there is certain level of price discovery, the number of groups and subgroups of products in ferrochrome market make standardization impossible, as the result market users will have to base their contracts on the best available information, which might not reflect price for specific product.

SoftMetal in our opinion is great solution for this situation:

· Counterparties can trade digital receipts (ENFERUMS) representing physical commodity with variable chemical composition, matching bids and asks filtered by quality parameters selected by buyer and seller on the exchange type auction mechanism.

· Platform will provide participants with automated transactions of the digital receipts (ENFERUM) representing physical metal stored at approved warehouses worldwide.

· Each transaction will require prompt settlement from the buyer in Fiat and/or CBDC (central bank digital currency) in the future.

· Platform will be based on contemporary development of auction theory expending principals of exchange type trading to multigrade products such as ferrochrome.

· The platform combines advantages of blockchain technology and end-to-end encryption, insuring confidentially of trader’s interest and invariability of the results. While information regarding settlement price, tonnages and bid/ask spreads will be available for platform participants. Transactions occurring on the platform, are impossible to modify, thus transparent price discovery is ensured on the algorithmic level.

· It publishes a spot price reflecting all trades transparently, with no possibility of editorial decisions by the platform.

· Their interests and positions also remain confidential to SoftMetal itself, rendering indiscretion and front-running impossible, making the platform a safe venue to trade.

See how it works on Demo version, to familiarize yourself with all the benefits SoftMetal offers. All those benefits will guarantee a transparent and liquid market, added by easy and reliable price discovery.

With Live version already launched, and continuous onboarding of new users, SoftMetal is gaining liquidity to become the main verifiable source of formula based long-term pricing for chrome related products.

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