I don’t really enjoy picking on Fortescue. It’s a terrific miner and Andrew Forrest is clearly the pick of the boganaires by a very long way. But it is Australia’s longer term largest marginal cost iron ore producer and thus occupies a unique “key stone” position in the fate of the nation.
Recently, I’ve noted that Fortescue’s discounting of its 58% iron ore has been rising fast and is showing no signs of easing. This has resulted in a very large lift in its 62% iron ore equivalent breakeven costs to $45 from $30, according to UBS.
Currently the miner is arguing that this will not persist. It may well be right. As coking coal falls in price, theoretically, lower quality and cheaper iron should become more popular with Chinese steel mills.
