Why the Big Three Aussie Iron Ore Stocks (BHP, Rio, and Fortescue) Copped a Beating Today…

What happened to the Iron Ore price?

Shares of Australia’s third largest iron ore producer, Fortescue Metals Group Ltd [ASX:FMG], slumped 3.7% today; BHP Billiton Ltd [ASX:BHP] fell more than 3%; and Rio Tinto Ltd [ASX:RIO] took a beating, down by 2.2%, as commodity prices fell following a strong rise in the US dollar.

Why are Iron Ore stocks feeling the pain?

The US dollar rose strongly overnight and today, causing key commodity prices to fall. That included falls to crude oil and gold.

As iron ore is also traded in US dollars, its price fell too.

Also, the chief financial officer at the biggest of the three miners, BHP Billiton, warned that ‘We’re seeing a moderation of the impacts of the stimulus which China was putting into its economy in 2016.

Economic stimulus from China has been a big driver for the resources sector over the past 10 years, and continues to be today. But, if China and Chinese businesses are cutting back, or slowing down on major projects, it will have a major impact on the demand for iron ore.

That will clearly have a direct impact on the big three Aussie iron ore miners, with the biggest impact being on Fortescue, due to its high levels of debt.

Should you buy these Aussie mining stocks?

The three big miners have performed well since they hit lows early in 2016. But now it’s hard to see the value in any of the three stocks. It’s certainly safe to say that, right now, from the biggest of the three miners (BHP) to the smallest (Fortescue), the iron ore sector is only for speculators.

By Kris Sayce


Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005. He is the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service, Markets & Money.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money