Why FMG and RIO share prices are among the worst performers today
Shares in iron ore miners BHP, Rio Tinto and Fortescue Metals have slid 3-5%.
It seems like a moment of reckoning for shares in Australia’s biggest miners. After a golden run stretching for most of this year, top miners BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) are among the worst performers on the ASX on Thursday, with the stocks down between 3% and 5%.
Why are FMG and RIO stock prices sliding?
While BHP shares have been partly affected by a discount on its shares due to their looming delisting from the UK FTSE, the stock, along with rivals Rio Tinto and Fortescue Metals, has been largely affected by the fresh plunge in iron ore prices.
Overnight, Mysteel’s iron ore price benchmark fell 4%, sliding below US$150 per tonne for the first time in nearly 5 months. Prices have now declined by a third since 15 July. They are also down nearly 40% from the peak of US$237 a tonne hit in May.
Analysts have blamed weakening domestic demand and China’s plans to reduce emissions by cutting steel output in key manufacturing regions for the sudden decline.
China’s steel industry has pledged to reduce output this year, a goal that requires huge second-half curbs to offset booming output earlier in 2021. Production in July was more than 8% lower year-on-year, data showed this week.
Profit hit
The 3 biggest miners have benefited from an extended run up in prices of the steel making ingredient this year, which largely traded above US$200 a tonne for the last 4 months due to a spike in demand in China and global supply constraints.
It directly boosted the bottom line of the miners, and was reflected in record results and dividends from Rio Tinto and BHP in recent weeks. Iron ore contributed more than two-thirds of profits for the 2 mining giants.
That dream run is now under threat, and will likely be reflected in the next round of results. This is prompting some investors to book profits from the rapid run up in recent months. Each of the 3 iron ore miners had hit their 52-week high over the last 4 weeks.
Estimates from the federal government had indicated that iron ore prices were set to ease over the second half of 2021, although they are expected to stay above US$100 a tonne until late-2022.
Considering buying mining shares?
If you are still keen to buy shares in BHP, Rio Tinto or Fortescue Metals, you can invest through an online share trading platform.
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