Why one top broker remains bullish on Australia’s big three miners

We unpack recent market data from the Metals Market Index and look at why Macquarie continues to favour FMG, BHP and Rio Tinto.

Iron ore prices remain elevated, with the 62% Fe Fines spot price closing out the day at US$87.72 per tonne.

In other areas of the market, iron ore inventories at Chinese ports have slowly declined since mid-February, dropping a further 0.75% to 109.34 million tonnes, for the week ending 20 March, according to the Metals Market Index (MMi).

Steel inventories have fallen even faster mind you, dropping 4.11% to 32.44 million tonnes, for the week ending March 20, according to the MMi.

Analyst thoughts

Speaking of these evolving market dynamics, Macquarie Wealth Management this week noted that the recent draw-down in steel inventories was likely ‘driven by a demand uptick on perceived accelerated start-up of construction sectors.’

Adding to that, Morgan Stanley recently argued that it expects Chinese steel demand will remain elevated as a result of ‘robust growth in infrastructure projects this year.’

‘As China is gradually returning to work, steel demand is improving, with steel inventories now declining and daily rebar transaction volumes approaching normal peak season levels,’ the investment bank further said.

Airy commodities and bullish outlooks

As iron ore prices continue to float around multi-year highs – and with markets buoyed by aggressive central bank policies and government stimulus commitments – it should come as little surprise that some of the world’s largest iron ore miners (many listed on the ASX) have performed strongly in recent times.

Indeed, by the close of Thursday’s session, Fortescue had seen its share price rise 2.94%; Rio Tinto had gained an impressive 5.14%, while mining heavy-weight BHP Group finished out the day down 2.01%.

More broadly speaking, though the big three miners have seen their share prices decline over the last month, they have nonetheless outperformed the broader benchmark in relative terms over that period.

Even when considering such declines, Macquarie Wealth Management has remained bullish on Australia’s big three iron ore miners, with the investment bank noting that elevated iron ore prices continue to bode well for BHP, FMG and Rio Tinto’s FY20 earnings outlook.

‘The Iron-ore miners are generating strong cash flow at spot prices,’ the investment bank said.

As a consequence of all this, Macquarie has retained its Outperform rating on all of Australia’s big three miners.

Internationally, Brazilian mining giant Vale – listed on the NYSE – saw its share price surge 7.34% to US$8.04 per share on 25 March. Pre-market data however suggests that Vale is set to open lower when US markets commence trading.

Providing an insightful take on commodity markets, the MMi yesterday wrote:

‘Strong bullish sentiment pushed both seaborne and port stock prices higher today [25 March], with SGX swaps and DCE iron ore futures following suit.’

However, speaking to the ever-changing implications of the coronavirus pandemic, it was flagged that:

‘Indian and South African ports have announced closures to prevent the virus spreading,’ with it being added that: ‘Mills preferred mainstream, medium-low grade products from Australia, potentially boosting physical port stock prices.’

How to trade the big three miners

What are your thoughts on the iron ore market: will prices hold up or are they set to decline? You can trade any of Australia's big three miners – both up and down – through IG’s world-class trading platform today.

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

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


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research 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 and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

See opportunity on a stock?

Don’t miss your chance. Try a risk-free trade in your demo account, and find out whether your hunch could have paid off.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

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

  • Trade a wide range of popular global stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform, when it matters

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Sell
Buy
-
-
China 300
-
-

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

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets 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 spread betting and CFDs.

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

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.