The real risk is in the discount for low grade FMG ore. The spread is headed toward -25% to 62Fe which indicates that the appetite for low grade is missing. From memory I think the last quarterly reported around a 18% discount.
I think this growing gap is largely to the regulatory drivers of the current market. China has restricted exports and made many efforts to maintain steel margins, whilst discouraging dirty low grade ore (and $$ coal). Reports that low grade is getting very difficult to shift.
Compare to the last IO downturn, where tighter steel margins drove some buyers to low grade ore, supporting the price spread to hold up relatively well in a falling market.
How this translates to dividends is intriguing: rising costs, out of favor product, and a single commodity (H2 is still just a money pit), surely the the divvy is the first to be scalped? Or is it the Future Industries budget?
Iron ore price, page-36156
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