The price of the iron ore miners has dropped today (25 July 2019):
- BHP Group Ltd (ASX: BHP) share price is down from around A$41.30 (24 July 2019) to A$40.49 (25 July 2019), representing around a 2 per cent drop.
- Rio Tinto Ltd (ASX: RIO) share price is down from around A$103.51 (24 July 2019) to A$96.74 (25 July 2019), representing around a 6.5 per cent drop.
- Fortescue Metals Group Ltd (ASX: FMG) is down from around A$8.73 (24 July 2019) to A$8.46 (25 July 2019), representing around a 3.1 per cent drop.
What caused the drop in the iron ore price?
This fall in the Australia big iron ore miners is due to a recent slight drop in the global iron ore price from $US120 per tonne to $US115 per tonne. This in light of the Brazilian iron ore mine Vale recommencing partial production of its iron ore mine in Brazil which was closed down because of the tailings dam collapse in 2018.
What now for iron ore produces in Australia?
The increase in the supply of iron ore may ease demand pressures for Australian iron ore producers, which could put downward pressure on the price of iron ore. This situation is unfavourable for BHP, Rio Tinto and Fortescue Metals, as a falling iron ore price will have material negative impact on profitability and cash flow. Over time, it can be expected that the iron ore price fall back to its long term trend (possibly around the US$50 to US$80 range).
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