Why have the BHP and FMG share prices rebounded today?
Shares in Australia's big 3 mining companies have lost 25-30% over the last 6 months, so why are they rebounding today?
The big iron ore miners are in the spotlight again with BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) among the top traded shares on Friday. All 3 miners were trading between 3.5-4.5% higher at the time of writing.
What is lifting the BHP and FMG stock prices?
Investors' sights are back on the miners after iron ore prices climbed on Thursday. Futures for benchmark 62% fines lifted 5.3% to US$94.20 a tonne, halting a rapid decline over the past few weeks.
The change in sentiment follows improved confidence in the ability of China's property sector to handle its debt obligations and hopes that its steel producers will be able to raise production.
It comes after reports that Chinese property giant Evergrande Group had managed to avoid a default by making overdue payments within an extended grace period.
Chinese steel demand, and consequently its iron ore requirement has been bolstered by the country's property sector and infrastructure expansion over the last few years.
A collapse of Evergrande would have had knock on effects across the property sector as well as wider ramifications for the broader economy.
Outlook still uncertain
Sentiment in financial markets has improved after indications that China is looking to provide more support to its heavily indebted property sector.
According to recent news reports, bank lending to real estate developers in China rose sharply in October, and is expected to extend into November.
At the same time, authorities have been looking to manage the Evergrande crisis (with the developer struggling to manage roughly US$300 billion in liabilities) by selling off some of the company's assets while limiting damage to home buyers and businesses involved in its projects.
That could help stall the faster-than-expected drop in iron ore prices and help prop up returns for the big miners, who benefited from an extended run up in prices between April and August due to a spike in Chinese demand and global supply constraints.
Previous estimates from the federal government had expected iron ore prices to ease over the second half of 2021, but stay above US$100 a tonne until 2022.
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