To calculate an index number, divide the selected month’s price by the
starting (base) value. Then multiply by 100. For example: Index number =
($720 / $500) x 100 = 144. To calculate the month-on-month percentage
change, divide this month’s value by last month’s value. Then subtract 1 and
multiply by 100. For example: Percentage change = ((120 / 110) -1) x 100 =
API RESEARCH METHODOLOGY
MEPS invites steel mills and users of API material to supply, in
confidence, their agreed selling prices for specific sizes and grade of API
material FOB. In return, MEPS supplies background market information in the
The results of the investigation are evaluated to check that the values
presented are within an acceptable tolerance band. Those outside a
reasonable tolerance are excluded from the final results. Finally, the data
is analysed and average quarterly steel prices calculated. The pricing
information is then translated into index values for inclusion in the
point out that MEPS research is carried out by ascertaining the prices
agreed and sold in US Dollar values. The information is kept strictly
confidential. At no time will price data be disclosed to third parties.
Prices are obtained for sour and non-sour material in grades X60 and X65. A
composite figure for the two API grades is presented. The products
researched are hot rolled coil and plate supplied from Asian and European
HISTORY OF MEPS RESEARCH
MEPS commenced the research by making contact with steel manufacturers
involved in the production of the relevant grades and product forms to
obtain agreed selling prices with their customers in the line-pipe business.
Many of the steel mills were known to us from research into carbon steel
prices. Several of the contacts had a history of providing realistic data
for MEPS research in many parts of the world.
To enable MEPS to obtain an objective view of the market, purchase prices
were also collected from buyers of API grade for line-pipe manufacturing.
This information was compared with that from the mills to check its
validity. When the data was comparable the respondent was retained. When it
was not the information was rejected.
All the pricing information was collected and an average price for each
product and grade was calculated each quarter. When all the information was
available a figure was calculated to determine the starting prices for each
of the indices. After detailed evaluation, it was decided that the average
selling and purchasing values collected in the final quarter of 2006 would
be the starting point for the index and defined as 100.
In subsequent quarters, to date, MEPS has undertaken similar procedures for
obtaining price information. Average figures have been calculated and a new
index value published.
All prices obtained in the research have remained confidential to MEPS. At
all times, the identity of the respondent and the prices provided have been
kept in safe keeping over the period. Over time, new respondents have been
included and old ones have been excluded.
It is important to note that this type of research is heavily dependent on
trust between MEPS and the steel price providers. The mills and line-pipe
producers need to understand that the information will be kept strictly
MEPS has been collecting steel prices since 1980. It has been publishing the
results for almost 30 years. All the data is aggregated and an average
figure produced. In this way no company information can be identified.
For the API research, actual price information is not published. MEPS
calculate the index values to show quarterly changes in agreed prices.
DEVELOPMENT OF INDEXES AND THEIR USES
Index pricing has become a popular tool for use by buyers and sellers who
are involved in medium and long term relationships. Buying and selling using
index values has the following benefits for both parties.
• Cost savings by minimising negotiating time and discussions on a regular
the background research necessary on both sides to prepare for regular
meetings prior to reaching agreements on price.
• Buyers and
sellers can concentrate their resources on the key points of quality,
delivery lead times etc.
• The indexes
are provided from independently researched information showing quarterly
changes in API steel prices. These can be in both upward and downward
The above benefits are only available if the index provider has the
experience, integrity and qualifications necessary to carry out the work.
The cooperation of buyers and sellers is also essential.
The reference point for all the current indexes is API steel prices agreed
in the final quarter of 2006 from MEPS research at that time. Investigations
have been carried out on a regular basis since that time and quarterly