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Australian miners fall as iron ore prices tumble

As volatility returns to the iron ore market, we examine some key pieces of market data, expert commentary and the recent share price performance of Australia’s mainstay iron ore miners.

A more normal market

Iron ore spot prices – long seeming to avoid the widespread market carnage of the coronavirus pandemic – have fallen steeply in the last few days.

Looking at the specifics, between 31 March and 1 April – the price of iron ore fell from US$88.02 per tonne to US$80.34 per tonne – representing a sharp 8.7% decline, according to Markets Insider.

This comes as Chinese steel and iron ore inventories continue to notch up steady declines: For the week ending 27 March, iron ore inventories at Chinese ports fell 1.44% to 107.77 million tonnes; while steel inventories in China dropped more aggressively, falling 4.54%, to 30.97 million tonnes.

As part of yesterday’s daily market summary, the Metals Market Index (MMi) noted:

‘Bearish sentiment pervaded the physical iron ore market today, with some port stock brands trading 10 yuan/mt lower than yesterday. Mill inventory at site remain at low levels as most mills still prefer to purchase as demand required.’

The MMi further pointed out that:

‘Mills in East China say they have reduced their iron ore inventory in plants to around 15 days given the expectation of more iron ore supply in the near future.’

Building on such points, the Financial Times this week reported that Vale’s Chief Financial Officer – during a briefing with analysts – argued that ‘weak demand from steel mills outside China would offset supply disruptions in the rest of the world, potentially denting prices, which have been remarkably resilient this year.’

At its 52-week peak, the 62% Fe Fines iron ore spot price traded above US$120 per tonne.

FMG, BHP and Rio Tinto share prices: a likely reaction

Amidst these volatile market conditions – Australia’s mainstay iron ore producers – Rio Tinto (RIO), BHP Group (BHP) and Fortescue Metals Group (FMG) all faced heavy selling pressure today.

FMG was the hardest hit of the big three, finishing out the session some 3.48% lower at $9.99 per share.

Mount Gibson Iron & Champion Iron share prices also drop

Smaller iron ore players such as Mount Gibson Iron (MGX) and Champion Iron (CIA) also struggled today – dropping 3.18% and 4.48%, respectively.

Further afield, Brazilian mining behemoth Vale (NYSE: VALE) saw its stock dip some 1.69% yesterday – closing out the session at US$8.15 per share.

Pre-market trading however currently suggests that Vale is poised to open higher.

How to trade the iron ore market

Where do you stand: are you bullish or bearish on the outlook of the iron ore market. Whichever way you lean, you can trade any of the ASX-listed mining stocks we have discussed – long or short – through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) BHP Group using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘BHP Group’ or ‘BHP’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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