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Has the Iron Ore Price Peaked?

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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.

iron-ore-price


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).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

 

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