Pressure on lower grade iron ore miners as discount widens – by Tess Ingram James Thomson (Australian Financial Review – June 15, 2016)

A big drop in the iron ore price in the last month has been compounded by a sharp increase in the discount on lower grade iron ore sold by Fortescue Metals Group and Australia’s junior iron ore miners.

The price of iron ore with a 62 per cent content delivered to the Chinese port of Qingdao – the benchmark spot price used around the world – fell 4.4 per cent to $US50.57 a tonne on Tuesday night, and has now fallen 23 per cent since the start of May.

But that period has also been marked by a flight to quality in the iron ore market, with the discount on iron ore with 58 per cent content more than doubling since the start of the year. On January 4, iron ore with a 62 per cent content was trading around $US42.7 a tonne, while 58 per cent iron ore was trading at $US38.52 a tonne – a discount of $US4.18 or 9.8 per cent.

But last week, with the spot price for 62 per cent ore at $US52.50 a tonne, the discount for 58 per cent iron ore was $US11.03 or 21 per cent.

The discount did get as high as 26 per cent in late May, after spending the first three months of the year oscillating between 10 and 15 per cent.

For the rest of this article, click here: