Iron ore price rally supportive of earnings for major miners such as BHP and Anglos
In this article we take a look at the recent iron ore price breakout and miners who should benefit from the move higher.
Iron ore on the rise
Iron ore has started to rise once again reaching its best levels in more than six months.
The increase is supported by the suggestion that steel producers could be increasing demand for the commodity as China emerges from its latest bout of the pandemic.
Further to this, markets are expecting that Chinese regulators will look to stimulate their economy through fiscal support and infrastructure spend. The real estate sector has come under pressure as of late following the failure of heavyweight development company Evergrande. Government support of the real estate sector now should help increase demand for the steel making ingredient (iron ore) as well.
Iron ore – Technical Analysis
The above chart uses moving averages to assess the trends in place for the price of iron ore (Dalian). The red arrow shows a bullish cross of the 20-day simple moving average (20MA) above the 50-day simple moving average (50MA). This highlights that in December 2021 we had started to see evidence that the short to medium term trends were shifting bias from down to up.
More recently we have seen the price trading back above the 200-day simple moving average (200MA). Suggesting that the long-term trend bias could be up now as well. For extra confirmation of the alignment of short (20MA), medium (50MA) and long (200MA) term trends, we would like to see the 50MA crossing back above the 200MA.
The price of iron ore has broken out of a broad range and looks to be renewing gains. 1065 provides us with our initial upside target from the move. Traders might look to pullback towards trend line support (black line) for long entry, while using a close below 835 as a suggestion that the move higher has failed.
Largest listed iron ore miners
Iron ore remains a large and often the most substantial contributor to earnings for a number ‘diversified’ miners. The largest listed, major producers of iron ore include: Vale, Rio Tinto, The BHP Group Limited, Fortescue and Anglo American Plc.
The BHP Group Limited and Anglo American carrying listings on the local Johannesburg Stock Exchange (JSE). Anglo American’s iron ore production is while not exclusively, primarily through its JSE listed subsidiary Kumba Iron Ore as well as its joint venture (Minas-Rio) operations in Brazil.
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