Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Investor Spotlight: Bucking the bears as iron ore mining surge

Australian iron ore miners rise despite global growth risks.

Video poster image

Mining stocks are flying once again off the back of hopes of a re-opening of China’s economy. In this week’s Investor Spotlight, we dig into the big three miners once again and look at whether now might be a good time to buy.

What’s happening with the iron ore price?

The iron ore price has bounced back, driven by the drip feeding of news regarding China’s relaxation of COVID-19 restrictions. The central government has approved measures to reduce lockdown times, narrow the scope of lockdowns during outbreaks, re-open schools, ease inter-province travel, and relax rules regarding PCR testing.

In addition to the prospect of greater movement activity, Chinese policymakers have also announced steps to support the country’s property sector and construction industries. A so-called “16-point plan” has been published, with measures including supporting lender liquidity, easing bank restrictions, and supporting development.

The iron ore price appears to be breaking out of a downward sloping wedge pattern now, as carves out a series of higher-lows and climbs above its 200-week moving average. The next key level to watch on the upside appears to be the 100-week moving average.

Iron ore weekly chart

Source: IG

The strength in iron ore has flowed through to the ASX 200’s material sector, which has underpinned the broader index’s strength lately. The sector’s technicals show that the price has approached a key level of resistance. If that holds, the charts show a possible emerging head and shoulders pattern.

Australia 200 Materials weekly chart

Source: IG

Three stocks to watch

  • BHP (BHP)

Despite a volatile year, BHP is poised to deliver a tidy return for investors in 2022, with the stock up by more than 10 percent year to date. Add on dividends, which came in at a record in the 2021/22 financial year, and BHP proved a fruitful investment.

In the company’s most recent update, BHP management reaffirmed the guidance it provided with its half-year result. However, it did highlight the risks going forward from supply chain disruptions and higher costs.

The broker community generally remains bullish on BHP stock. Seven recommend a buy rating and 13 suggest a hold. The share price is currently trading at a premium to the consensus price target, which is $43.85.

BHP’s technicals suggest a bullish short-term trend. The stock is trading in the middle of its long-term range between roughly $35 and $55 per share. Momentum looks skewed to the upside, with the 100-week moving average a potential level of support.

BHP weekly chart

Source: IG
  • Rio Tinto (RIO)

Although often dismissed as BHP’s uglier younger sibling, Rio Tinto has risen more than 16 percent this year, while also returning capital hand-over-fist to shareholders.

There is some reluctance from investors to invest in Rio over BHP, in part due to ESG concerns stemming from the Juukan Gorge fiasco. Nevertheless, analysts retain an overall buy rating on the stock, with eight recommending that action, and 10 suggesting a hold. Its price target is also at a smaller discount and at $111.35.

Rio’s recent production update met expectations, while also highlighting some of the growth headwinds emerging in Europe and the US, along with the “challenging” environment in China.

Momentum is to the upside for Rio shares, after it bounced off the 2022 lows around $87 per share. Previous resistance at $107 may act as future support.

Rio Tinto weekly chart

Source: IG
  • Fortescue Metals Group (FMG)

As we discussed here last week, Fortescue Metals Group shares flew in November, as investors welcomed signs of a less-hawkish US Fed and the easing of Chinese COVID-19 restrictions.

Looking back through 2022 however, FMG has underperformed its Big Three counterparts, delivering a five percent return to its shareholders. It has also generously returned capital to investors.

Fortescue shares broke through the key levels identified in last week’s weeks during last week’s trade, with the next key level of resistance around $22 per share. Previous resistance at $20 may now be a level of support to watch.

Fortescue Metals Group weekly chart

Source: IG

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.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.