Corect. Lower grade ores use more coal so the discount is greater when coal prices are high.
However the pricing of iron ore is very complicated and coal prices are only 1 factor. The mineralogy component is important (goethite, hematite, magnetite) because it affects the level of impurities for the lower grades.
The high grade premium is also important. If steelmakers want high grade to reduce air pollution then the high grade premium goes up and so the low grade discount also widens. This is to do with steelmakers having the option of blending 65% and 58% Fe to get 62% causing the high and low grade premium and discount to be correlated.
Plus the sintering properties of the ore are important. Some of the FMG product is quite low grade but FMG doesnt get a large discount for it. Presumably this is because of its mineralogy and how it sinters.
Pricing iron ore is complex but the 58% Fe benchmark is a good rule of thumb to use for the FMG product. Over time you can track the FMG product pricing via their quarterly reports and their prices correlate reasonably well with the 58% Fe benchmarks.
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