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Report: Fortescue Metals giving higher iron ore discounts in China

Traders told The Australian Financial Review that the discount on Fortescue Metals Group Ltd.'s high-grade iron ore in China reached a record 33% in February, despite CEO Neville Power previously saying the highest price discounts are expected in the December 2017 quarter.

The 33% discount on Fortescue products with a 58.3% iron ore content compares to a 29% discount in January 2018 and December 2017, 25.5% in November 2017 and 8.5% in January 2017, the Australian newspaper reported Feb. 6. The discount on its lowest-grade ore, meanwhile, remains stable at 40% in February, the same level as in the last five months.

Du Hongfeng, an analyst at consultancy Steelhome, said Fortescue's discounts aim to maintain the company's market share amid weaker Chinese demand. However, the outlook for demand is positive as Chinese steel mills continue to stock up on iron ore.

"We have maintained our full year price realisation guidance at 70 to 75 per cent in line with expectations that the market will rebalance as the interventions come to an end — a view supported by market commentary out of China," Power said, adding that price achieved for Fortescue's products has remained "largely consistent" over the past years.