The best iron ore stocks on the ASX

Iron ore stocks are a staple on the Australian stock market, with mining stocks making up a significant chunk of the biggest 200 listed companies (S&P/ASX200 index).

Along with growth potential, major iron ore stocks in Australia tend to be some of the top dividend payers. And Australia's three largest iron ore stocks, BHP (BHP), Rio Tinto (RIO) and Fortescue Metals Group (FMG), are among the world's five biggest producers.

What to know before buying

Mining stocks of any kind are volatile. While Australia's biggest iron ore miners, such as BHP and Rio Tinto, are among Australia's oldest and largest corporations, their stock prices are largely influenced by the global supply and demand for steel.

Iron ore prices are also largely influenced by China's demand - the biggest buyer of Australian iron ore. With ongoing trade tensions between Australia and China over the last few years, Australian iron ore companies could see profits fall if China increases tariffs on Australian goods.

Demand for iron ore is also influenced by the strength of China's GDP. If China's economy is growing at a healthy pace, it will look to purchase more iron ore to fuel ongoing construction. However, construction will likely slow if China experiences a slow-down.

Iron ore stocks to watch in 2024

It's not easy picking quality stocks. To help identify iron ore stock picks for 2024, we used Finder's proprietary algorithm to filter Australian-listed companies that have strong fundamentals. We take into account historical prices, dividends, revenue growth, (low) price volatility and profit margins, which might indicate a quality stock.

To avoid speculative stocks, we only include companies with a market cap of more than $1 billion. In order to better compare historical data, we filtered out stocks that have been listed on the ASX for less than five years.

This doesn't mean these are the best stocks for you. Always do your own research and chat with a professional when in doubt.

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Frequently asked questions

• What factors affect the price of iron ore?

  Iron ore prices are largely influenced by global supply and demand. Key drivers include China's steel production levels, infrastructure spending worldwide, the quality and availability of ore and shipping costs. Market sentiment and geopolitical factors, such as trade policies or sanctions, can also push prices up or down.

• How can I invest in iron ore without buying individual stocks?

  If you want exposure to the iron ore market without picking individual companies, you can consider exchange-traded funds (ETFs) or managed funds that track the performance of mining or materials indexes. Some also invest in commodities directly, offering a diversified approach to the broader resources sector.

• Are iron ore stocks considered a good long-term investment?

  Iron ore stocks can offer strong long-term growth potential, especially when demand for steel remains high. However, they're cyclical and heavily dependent on global economic activity and commodity prices. Longer-term investors may benefit from dividends and capital growth during boom periods but should be prepared for fluctuations.

• What are the risks of investing in iron ore stocks?

  Investing in iron ore stocks carries risks such as price volatility, regulatory changes, rising production costs and global competition. Environmental, social and governance (ESG) considerations are increasingly important and stricter sustainability requirements could affect profitability in the future.

• How do I compare iron ore companies before investing?

  To compare iron ore companies, look at their production capacity, cost of operations, diversification of assets and overall financial health. It's also useful to review their dividend history, growth strategy and exposure to different markets. Balance sheet strength and management track record can give you insight into their ability to withstand downturns.

• Do iron ore companies pay dividends?

  Yes, many established iron ore miners regularly pay dividends, often linked to commodity price cycles. When prices are high, profits and dividend payouts typically rise. However, dividend yields can vary depending on company policy, reinvestment strategies and market conditions.

• What's the outlook for the iron ore sector in Australia?

  Australia remains one of the world's largest iron ore producers and demand from developing economies continues to underpin the industry. While near-term prices can fluctuate, the long-term outlook may remain steady as global infrastructure projects expand and newer markets emerge.