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What’s the outlook for the iron ore market and the major miners?

As volatile conditions persist, iron ore prices are expected to remain under pressure.

The iron ore market Source: Bloomberg

BHP, FMG and Rio Tinto share prices trade lower

Amid broad market weakness, iron ore giants BHP Group (BHP), Rio Tinto (RIO) and Fortescue Metals Group (FMG) all saw their share prices decline today.

FMG was the worst performing here, with its share price dropping 1.47% – to finish out the session at $11.40 per share.

Intraday price weakness aside, according to Macquarie Wealth Management, the current coronavirus pandemic ‘appears to have had little impact on Australian miners thus far, with companies changing rosters to better deal with the virus and continue operations.’

Macquarie has Outperform ratings on BHP, FMG and RIO.

Champion Iron & Mount Gibson Iron share prices buck the trend

Though the majors declined during Wednesday’s session, both Champion Iron (CIA) and Mount Gibson Iron (MGX) saw their share prices rise.

Champion Iron was the standout performer of this duo, with its share price finishing out the day up 2.67%, closing out the session at $1.92 per share.

Overall, analysts from Macquarie flagged that ‘Despite slower ramp-ups, we expect MIN and MGX to report a material boost in volumes’ in the fourth quarter of the 2020 fiscal year.

Like the majors, Macquarie has Outperform ratings on MGX and CIA.

Iron ore price: the 2020 outlook

From a broader perspective, Westpac economists said that even in the face of growing coronavirus concerns, their end of calendar year iron ore price estimate remains unchanged at US$65 per tonne.

Positively at least, the bank’s economists noted that while February exports were impacted by volatile weather conditions, in March Australian iron ore exports ‘roared’ back to life.

Would this be enough to sustain iron ore prices? The bank thinks not.

Rather, Westpac economists noted that this uptick in ‘Australian exports through March gives us less confidence that a recovery in Chinese demand will be enough to sustain prices through the next few months.’

The 62% Fe Fines iron ore spot price last traded at US$ 84.44 per tonne.

Industry data in focus

Looking at industry data, the Metals Market Index (MMi) yesterday reported that for the week ending 10 April, steel inventories in China fell by 5.76% – to 27.88 million tonnes. Comparatively, for the week ending 3 April, iron ore inventories at Chinese ports rose 1.47% – to 108.43 million tonnes.

Yet maybe most interestingly, according to MMi market commentary:

‘China’s demand for iron ore will increase in the short term with blast furnace steelmakers stepping up operations, but the demand growth will be capped in the medium-to-long run amid the fast spread of the global coronavirus outbreak.’

As a consequence of this, it was noted that those factors, ‘together with expectations of rising supply, will keep iron ore prices under pressure.’

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