US miner Cliffs has warned its Australian iron ore division will struggle to break even if large discounts continue to be applied to its product.

Cliffs exports about 11 million tonnes of iron ore each year from Western Australia, but like Fortescue Metals Group, the bulk of its product has iron grades of 58 per cent – below the benchmark 62 per cent iron grade typically shipped by BHP Billiton and Rio Tinto.