Falling Iron Ore Prices Prove Earlier Forecasts Correct

Forecasts for iron ore prices have long since pointed towards a massive decline. Earlier in the year the federal government predicted that iron ore prices could fall as much as 20% from 2017.

Meaning the average price of iron ore could settle as low as $51.50 this year. While we aren’t seeing these prices just yet, and of course it’s only one prediction ­— other predictions from UBS and ANZ place prices slightly higher at $US67 and $US69 — a drop in price amid an economic slowdown in China is bound to hurt Australia.

After all, iron ore is our biggest export.

Chinese iron ore futures fell sharply yesterday in overnight trading, completely undoing earlier increases. Meanwhile, spot prices were unavailable on account of Singapore’s public holiday.

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Demand decline hurting iron ore prices

The January 2019 iron ore contracts in Dalian ended Tuesday’s session a great deal lower at 510 yuan, lower still than Monday night where it closed at 516 yuan.

When it comes to investing in commodities such as iron ore, it pays to know a bit about the sector and will demand declining and a looming trade.

These falls coincided with major losses in steel futures, as demand decline combined with the threat of a trade war will slow down global growth — product decline often equates to revenue loss.

When it comes to investing in commodities such as iron ore, it pays to know a bit about the sector. There’s only so much we warn of economic slowdowns, demand cuts and trade wars, so if you’d like to read more about it, you can do so here (for free). Our resource analyst Jason Stevenson believes that your best bet in the resource sector might come from more lucrative stocks which are necessarily restricted to iron ore.

In similar news, rebar futures fell sharply in Shanghai, ending their session at 3,962 yuan, down from Monday night’s close of 4,060 yuan.

It seems that Monday’s trend of declining prices bled into Tuesday trading, and could potentially continue.

Iron ore forecasts look underwhelming

This week’s trend and the continued declines means that today’s spot markets started off on shaky ground, trading weaker this morning.

Despite this, spot markets spiked after news that BHP has suspended rail services after a train derailed in Western Australia. HSBC’s global mining and metals equities team responded to the news.

We expect further weakness in exports from BHP during November given disruptions to the rail line caused by a runaway train incident,’ HSBC’s global mining and metals equities team in response to the news.

Data released by the Pilbara Ports Authority revealed iron ore shipments fell by 8% in October, including a 12% decrease in exports to China, which seems to be offset by renewed weakness in steel markets.

Regards,

Ryan Clarkson-Ledward,
For Markets & Money

PS: Aussie investors have seen great results from iron ore investments in the past. But Markets & Money resources analyst, Jason Stevenson believes that your best opportunities lie in smaller, more speculative stocks which aren’t restricted to iron ore. The kind that could see massive share price moves from a single positive drill-hole result. For 10 of his favourite mining stocks on the Aussie market this year, download his free report ‘Top 10 Mining Stocks 2018’ today.


Ryan Clarkson-Ledward is a junior analyst for Markets & Money. Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers. Ryan’s work with Sam is designed to provide research that complements Sam’s analysis for small-cap and technology stocks. Together, their objective is to break through all the jargon and give you the hard facts to inform your investment decision-making. Ryan writes for:


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