BHP, RIO and FMG share prices: June quarter shipments preview

The iron ore market remains resilient, supply side issues persist and June quarter production results for Australia's big three miners loom.

With Australia’s big three miners – Rio Tinto (RIO), BHP Group (BHP) and Fortescue Metals Group (FMG) – all set to report their June quarter production results in the next month, we examine how one investment bank thinks they have performed, in terms of quarterly iron ore shipments.

Quarterly shipment forecasts in focus

Using port data, analysts from Macquarie Wealth Management posit that Australia’s large-cap iron ore players have seen their operations face ‘little impact’ as a result of Covid-19, with individual firms ‘changing rosters to better deal with the virus and continue operations.’

Specifically, Macquarie currently believes that both BHP and FMG will meet their FY20 shipping guidance, with the investment bank forecasting that FMG’s June quarter shipments will come in at 45.0 million tonnes; while BHP's June shipments are currently forecast at 76.3 million tonnes.

By comparison, RIO's June shipments are expected to come in at a combined 90.1 million tonnes – made up of 85.8 million tonnes from Rio’s Pilbara operations and 4.3 million tonnes from the Iron Ore Company of Canada (IOC).

Rio Tinto closed out Wednesday's session down 0.83%, FMG down 0.65%, while BHP finished out the day flat.

The iron ore price outlook

Shipment forecasts aside, iron ore prices have continued to trade strongly in the last few months after a Brazilian judge ordered mining giant Vale (NYSE: VALE) to take around 10% of its iron ore production offline as a result of mounting coronavirus concerns. Chinese demand for iron ore has also remained robust.

In step with that, iron ore prices have remained elevated in response to these supply-side issues, with CME's front-month iron ore futures contract last trading at US$98.45 per tonne.

As a result of robust iron ore prices across the June quarter, Macquarie this week upgraded their FY20 earnings outlook for the iron ore miners in their coverage universe.

‘We remain positive on stocks with iron-ore exposure due to strong cash flow yields and earnings upgrade momentum,’ the investment bank said.

Australia’s Department of Industry, Innovation and Science (DIIS) appears more sceptical of the medium-term outlook for iron ore, noting in its recently released Resources and Energy Quarterly, that ‘It is expected that supply conditions will improve before the impacts of COVID19 fully pass, creating a likelihood of weaker prices.’

The DISS forecasts that iron ore prices will average US$65 per tonne in 2022, while total Australian export volumes are expected to hit 915 million tonnes by 2021 to 2022.

Looking forward, BHP is set to report their June quarter production results on 21 July, RIO on 17 July and FMG on 30 July.

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