Mt Gibson Iron boss Jim Beyer says the wide price spread across ore with varying iron ore grades is here to stay. 

Speaking after the miner released its March quarter report, Mr Beyer said while there would be “pinching and swelling” based on seasonal demand and short-term, city-specific policy changes in China, the market would not return to the days of a 5 per cent discount for 58 per cent ore versus the benchmark 62 per cent price.

And the iron ore boss said it didn’t necessarily mean that Chinese steel producers would switch back to lower grade ore as steel margins eased, as some analysts had predicted.

“The move to more sophisticated mills means it’s even more important to get the recipe right because using lower grade ore can damage the mills and increase costs per unit,” he said.

Producers of lower grade ore have been forced to accept big discounts of up to 40 per cent in recent months as China moves towards more efficient, less polluting steel production.

Conversely, miners delivering grades of 65 per cent and higher have enjoyed big premiums on the benchmark price.

The price spread across lump and fines products has also widened because fines need to be converted into a sinter, which requires other inputs and more energy in blast furnaces thereby creating more pollution.

Highlighting the trend, Mt Gibson noted it had received $US64/t for its Iron Hill lump product with grades above 60 per cent in the March quarter compared with $US35/t for its fines product with grades below 60 per cent.

Mt Gibson expects to re-open its high-grade Koolan Island mine in the Kimberley early next year while its existing Mid-West operations are expected to wind up at the end of this year.

Koolan — which was suspended in 2014 when a seawall separating the mine from the ocean failed, flooding its main pit — will deliver the highest grade direct shipping ore product in Australia at 66 per cent iron.