CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Big three miners volatile as commodity exports tipped to hit $310bn

Iron ore stocks prove volatile after the Department of Industry says they expect energy and resource exports to rise this year and next.

Miners volatile

The ASX 200 Materials index was volatile in the first few hours of trade even as energy and resources export earnings were tipped to rise dramatically in 2021.

The materials index was up 34 points, to 17,147 points by noon, trading close to the top-end of its 52-week range, as commodities continue to trade strongly and the outlook for exports remains robust.

Elsewhere FMG was volatile, opening lower, then surging by 11:00 AM, BHP was consistently higher and so was Rio Tinto. One wonders if FMG’s concentration in iron ore is beginning to become a problem for the market.

This comes after data from the Department of Industry, Science, Energy and Resources forecast that energy and resource export earnings will finish out 2021 at $310 billion, implying a year-on-year increase of just over 10%.

Last year energy and resource export earnings hit $281 billion.

Looking ahead, export earnings are expected to continue to rise in 2022, forecast to increase 7.7% to $334 billion.

Commenting on these expectations, Federal Resources Minister Keith Pitt, said:

‘These incredible results underline the importance of Australia’s resources sector to the national economy and international markets throughout the COVID-19 downturn’

‘The outlook for Australia’s energy and resource commodity exports continues to improve,’ Mr Pitt added.

This comes as iron ore – Australia’s largest commodity export – continues to rise, with IG’s iron ore instrument last trading above the 1,100 mark.

At the time of writing, 52% of IG client accounts were short on this market.

As iron ore continues to trade around all-time highs, concerns around the fragility of the market: just how long can it stay where it is, look to be becoming increasingly evident.

Industry insight

Looking at industry data from the Metals Market Index, for the week ending June 18, Chinese iron ore inventories were down, while steel inventories grew.

Specifically, iron ore inventories at Chinese ports fell 1.51% for the week, to 114.36 million tonnes; while steel inventories surged, gaining 3.81% to reach 16.88 million tonnes.

Giving some added colour to those data points, the market commentary in the Metals report, dated June 24, noted:

'Due to an accident in Dai country iron mine occurred this month, the local Ministry of Industry and Information Technology recently issued a request for the implementation of industrial power cuts for 84 iron ore processing plants, 83 iron ore beneficiation plants and other enterprises in Dai country; according to SMM, the local mines have not yet received electricity recovery time.'

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