SMH cited Mr Mike Henry marketing president of BHP Billiton as saying that price discounts for lower grade iron ores are here to stay, despite the protestations of smaller miners like Fortescue Metals Group and Atlas Iron.
Lower grade iron ores have traditionally sold for between 93% and 87% of the benchmark iron ore price in recent years but in the June quarter that pricing discount was significantly wider.
Fortescue and Atlas produce lower grade iron ores and both reported received prices that were weaker than expected. Fortescue revealed a price discount of 20 per cent below the benchmark price in June.
Mr Henry said that ''Without wanting to call the exact differentials I think the dynamic of wider spreads than we've seen in times when the market was tighter is absolutely here to stay.'
He said that ''As the steel industry in China moves towards higher productivity and wanting to make use of their more productive, higher-volume blast furnaces, they are more than likely to want higher quality product and be willing to pay a premium for that relative to the lower quality iron ores.''
Mr Henry said that BHP's long term view of the iron ore price had not changed, despite the recent dip below USD 100 per tonne. We are not reading too much into the sharp dip that occurred or the slight rebound that we are seeing currently. We just see it as part of a long run trend where you are going to see volatility around the mean but that mean is going to be declining over time.”
