Platts, the commodities price-reporting company owned by McGraw-Hill Financial Inc., said it has no plans to audit its data providers after CRU Group said it hired a third party to review how it collects steel prices.
Platts, which was raided last month as part of a European Union antitrust investigation on oil prices, provides benchmark assessments on a number of physical markets using data on actual trades and its own judgment. London-based researcher and consulting company CRU, which publishes steel prices that compete with Platts, said it will begin a third-party audit process of its data suppliers “in earnest” next week.
“We have no plans to audit data providers,” Joe Innace, Platts’ editorial director for metals, said today in an e-mailed statement in response to Bloomberg questions. “We are confident in the quality of the data we publish.”
CRU’s audit will apply to the U.S. Midwest hot-rolled coil, cold-rolled coil, hot-dipped galvanized coil and plate, it said in a statement dated yesterday from Pittsburgh, Pennsylvania, and London. Glenn Cooney, head of operations at CRU Indices, said in an interview today that the company has been planning for the audit for 12 to 18 months “to maintain our position as the market-leading index provider in North America for carbon steel.” He declined to name its audit company.
CRU’s hot-rolled coil index is used to settle steel contracts in North America worth more than $20 billion a year, CRU said in the statement. China, the world’s biggest buyer of iron ore used to make steel, started its own spot trading platform last year, introducing a weighted average daily price in March.
Much of the global trade, valued at about $180 billion, continues using Platts, which became the leading price index after producers including Vale SA and Rio Tinto Group scrapped annual contract price talks in 2010. The China Iron & Steel Association has questioned the reliability of Platts’ steel price index, the industry’s benchmark gauge.
Pricing mechanisms are under scrutiny around the world after U.S and U.K. investigators uncovered widespread attempts by banks to manipulate the London interbank offered rate, or Libor, the benchmark lending rate tied to $300 trillion in securities worldwide. Regulators are also looking for evidence of price fixing in ISDAfix, the benchmark rate for the $379 trillion swaps market.
Companies including Royal Dutch Shell Plc, BP Plc, Statoil ASA and Platts have said they’re being investigated after the European Commission conducted raids in three countries in search of evidence of collusion in the oil industry. Price fixing in energy markets has the potential to inflate production costs and consumer prices for everything from gasoline to airline tickets to cosmetics.
Price assessments that are published by Platts and its competitors, including Argus Media Ltd. and Reed Business Information’s ICIS, are used to value raw materials used in everything from plastic bags to car parts in the $2.2 trillion global base chemical industry as well as coal, power, metals, emissions, liquefied natural gas and shipping rates.
Platts publishes two steel price series, its TSI index that is operated independently from its editorial section and a daily telephone survey that “is underpinned by a strict and transparent methodology and governed by well-established data verification techniques,” Innace said.
“Any data supplied to Platts and TSI by our sources must meet our methodology guidelines and must be reflective of true market value,” he said.