The best performer on the ASX 200 on Tuesday has been the Fortescue Metals Group Limited (ASX: FMG) share price.
In early afternoon trade the iron ore producer's shares have stormed almost 7% higher to $7.64.
Why is the Fortescue share price storming higher?
Investors have been scrambling to buy Fortescue's shares on Tuesday after the price of low grade iron ore zoomed higher following the suspension of one of Vale's key mines.
According to Metal Bulletin, the price of the low grade 58% fines rose a sizeable 2.9% to US$82.48 a tonne. This was the highest level that 58% fines have traded at in five years and stretched its 12-month gain to over 100%.
Another positive was that benchmark 62% fines only rose modestly on Monday, which means the discount between the low grade and benchmark fines has now narrowed to its tightest level in over three years.
Last year the Fortescue share price came under significant selling pressure after a preference for the less polluting high grade iron ore by Chinese steel makers led to the discount increasing materially.
In its first half results of FY 2018 Fortescue revealed that it was selling its iron ore at a 31% discount to the 62% fines, whereas now the discount between the 58% fines and 62% fines is just 12.5%.
What about the other miners?
Positive investor sentiment and modest increases in other iron ore grades have also lifted the rest of the iron ore miners today.
The BHP Group Ltd (ASX: BHP) share price is up 1.5% to $37.40, the Mount Gibson Iron Limited (ASX: MGX) share price has risen over 2% to $1.16, and the Rio Tinto Limited (ASX: RIO) share price has pushed 2.5% higher to $96.39.
Should you buy the iron ore miners?
I'm not convinced that iron ore prices will remain at these lofty levels in the medium term, so I'm not going to be investing in a pure play iron ore producer like Fortescue.
But I do still think diversified miners like BHP and Rio Tinto are attractive at current levels and could be a safer way of gaining exposure to iron ore.
