Iron ore miners shares drop as prices collapse
Shares in all major iron ore producers were getting hammered Friday as prices for the steelmaking material plunged by almost 7% overnight, erasing all of this year’s gains and placing the commodity in a bear market.
Ore with 62% content in Qingdao dropped 6.8% to $75.45 a tonne, which means seaborne has declined more than 20% since its Feb. 21 peak, according to the Metal Bulletin. Earlier in Asia, futures in Dalian fell 6.2% to the lowest close in five months as steel tanked.
After a 85% rise in 2016, iron ore prices are now down 3.1% so far this year, which highlights the volatility of the market.
Brazil’s Vale (NYSE:VALE), the world’s No.1 producer, was down 2.29% in pre-market trading in New York to $8.95. Rio Tinto (ASX, LON:RIO), the second largest iron ore miner, closed 1.10% down in Sydney to A$60, and had already shed 1.77% in London at 2pm local time. Meanwhile, number three BHP Billiton (ASX, NYSE: BHP) (LON:BLT) closed slightly down in Sydney (-0.32%) to A$24.59, and was trading 0.94% lower in London to 1,262.50 p early afternoon and -1.02% l in pre-market in New York.
Fortescue Metals Group (ASX:FMG), the world’s fourth largest miner of the steelmaking ingredient, was one of the biggest losers of the session, closing 3.02% down to A$6.11
Some believe the current drop in prices has its roots in mounting inventory at Chinese ports, currently sitting at the highest levels since 2004.
Today’s drastic descend followed a new quarterly report from Australia’s Department of Industry, Innovation and Science predicting average iron ore prices in China may drop to $65 a tonne this year before falling even further to $51, “weighed down by the combined impact of ongoing growth in low-cost supply and soft demand.”
“Growing supply, primarily from Australia and Brazil, is expected to steadily outpace demand growth over the rest of 2017. As a result, the price is projected to decline,” the authority said. “Current price levels are unlikely to be sustained beyond the short term,” it said.
Today’s price slump also coincides with a general drop in base metal prices and a surge in gold after the US launched 59 Tomahawk cruise missiles against Syria, boosting demand for safe havens but hurting risk assets.