FMG, BHP Group and Rio Tinto share prices surge as iron ore goes parabolic

Will iron ore prices remain higher for longer or are we close to the top?

Iron ore prices have surged in the last week off the back of Chinese production cuts and the speculation of further issues between Australia and China.

Despite the second of those catalysts, Australia’s big three iron ore miners – Fortescque Metals Group, BHP Group and Rio Tinto – saw their share prices surge on Monday off the back of this run-up in the commodity.

IG’s iron ore instrument surged on Monday, gaining 7.7% or around 85 points, to trade above the 1300 handle – as of 12:27PM Melbourne local time.

Industry data paints a comparably bullish picture. From the May 7 Metals Market Index report, freight rates and steel prices were all up dramatically, while iron ore and steel inventory levels both fell.

Specifically, for the week ending May 7, iron ore inventory at Chinese ports dropped 1.34% to 122.54 million tonnes, while steel inventories in China dropped almost a full percent to 18.67 million tonnes.

FMG, BHP and Rio Tinto Share Prices ↑

Against this backdrop of rising iron ore prices, investors on Monday bid Australia’s iron ore miners higher: Fortescue Metals Group (ticker: FMG) was up over 6%, BHP Group (ticker: BHP) had gained close to 3% and Rio Tinto (ticker: RIO) was up 3.13%.

Are we now looking at a situation in which iron ore prices will remain higher for longer? The previous assumption from many brokers seemed to be that mid-term, iron ore would soon fall back below the US$100 per tonne mark.

That hasn’t played out yet. Rather, the market has persisted in finding new catalysts to push the price of the commodity higher.

Iron Ore Price: Possible Catalysts

According to CRU Group’s steel analyst, Erik Hedbord, the recent bullish price action in iron ore markets has been driven by a ‘flight to quality’ of sorts.

‘Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise with steel supply being restricted,’ Mr Hedbord said.

There may also be a geopolitical catalyst in play, with the South China Morning Post arguing that the recent run-up in iron ore prices is based on the:

‘Speculative premise that the price of iron ore imported into China would soar if the Beijing were to cut back or cut off Australian supplies.’

Over 50% of global iron ore exports are from Australia.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

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

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.