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Why are the BHP and RIO share prices rebounding?


Shares in iron ore miners BHP, Rio Tinto and Fortescue Metals have climbed 8-15% over the past month, although they remain volatile.

Iron ore miners BHP (ASX: BHP) and Rio Tinto (ASX: RIO) are among the top traded shares on the ASX on Friday.

The 2 stocks are up more than 2% each, while rival Fortescue Metals Group (ASX: FMG) is not far behind, having risen 1.5% by the time of writing.

Why have the BHP and RIO stock prices lifted?

Iron ore prices have been on the mend over the last several weeks and have now rebounded more than 20% this past month.

Prices for the benchmark 62% fines quality rose another 2.4% on Thursday to settle at US$127.58 a tonne, their highest level since mid-October.

The ascent has been driven by speculation about recovering demand for the steel-making ingredient in the world’s largest market, China.

A large part of the current moderation in demand is on account of Chinese authorities putting restrictions on factory activity to ensure clean air quality for the Beijing 2022 Winter Olympics next month.

Traders widely expect steel production to rebound after the games are concluded.

There are also hopes that the country’s troubled property sector, which is a major driver of steel production, will be able to manage its debt obligations, ultimately helping revive demand for iron ore in the medium term.

Market sentiment has been boosted by a statement this week by China’s Premier Li Keqiang emphasising the need to stabilise China’s macroeconomic situation in the first quarter of 2022.

Price outlook

That could help stall the swift drop seen in iron ore prices over the last 6 months and help prop up returns for the big Australian miners, which have recently faced downgrades from analysts over concerns about the sustainability of their profits.

The top 3 iron ore exporters benefited from an extended run up in prices beyond US$200 a tonne between April and August last year due to a spike in Chinese demand and global supply constraints.

It allowed them to deliver record profits and shower investors with their best ever dividends.

But based on the more gloomy market conditions that have followed, most brokerages cut their expectations in recent months for iron ore prices. Even the federal government lowered its estimates for iron ore prices, expecting them to drop below US$100 a tonne in 2022.

But some investors are now betting that numbers to be reported by the miners at their results in February will not be as bad as initially feared. That could reflect in better than expected profits and dividend payouts.

Considering buying mining shares?

If you are keen to buy shares in BHP, Rio Tinto or Fortescue Metals, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

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