Iron ore discounting here to stay, analysts say

WOOD Mackenzie says that tiered pricing for iron ore is a structural change that will persist in the long-term.

Iron ore discounting here to stay, analysts say Iron ore discounting here to stay, analysts say Iron ore discounting here to stay, analysts say Iron ore discounting here to stay, analysts say Iron ore discounting here to stay, analysts say

A preference by Chinese steel mills for 62%-plus ore has seen the discounts for 58% iron widen over the past year.

FMG received over 91% of the Platts 62% iron price in the December 2016 quarter, but that slumped to just 66% for the December 2017 quarter.

The company was recently forced to lower its full-year price realisation from 70-75% to just 65%.

WoodMac's steel industry value-in-use model indicates price spreads between high and low-grade ore will remain wide into the future.

"We forecast the discount for Fortescue Metals' 56.7% Fe Super Special Fines will be sustained at 24% relative to the 62% Fe fines benchmark," it said this week.

"Similarly, we forecast the premium for Vale Carajas fines can be sustained at 20% above the 62% Fe fines...