If you’ve been watching the price of iron ore, you’ll know mineral has been up and down. Spot prices ran up above US$94 a tonne on 21 February, only to quickly race back down below US$64.
Iron ore is now sitting around US$65 a tonne. But confidence in iron ore demand and steel production can quickly change, as we’ve seen.
The last thing iron ore miners like BHP Billiton Ltd [ASX:BHP] and Rio Tinto Ltd [ASX:RIO] need is uncertainty over demand.
But thanks to Donald Trump, sentiment for the commodity could soon hit rock bottom. As reported by the Sydney Morning Herald (emphasis mine):
‘President Trump ordered the Commerce Secretary to prioritise an investigation into whether steel imports into the US “threaten to impair national security”, by drawing on an obscure provision in a 1962 trade law.
‘The move opens up a path for the Trump administration to potentially impose harsh tariffs on steel from a broad range of countries that Australia exports the steel-making ingredient iron ore to.’
This would likely affect the demand for iron ore, having a flow-on effect on both BHP and Rio.
Of course, this is just speculation for the moment. Trump’s investigation could end up going nowhere. For now, BHP and Rio seem to be safe, as investors bid up both stocks this morning.
Thanks to overnight trade, both BHP and Rio are up 1.9% and 2.5% respectively this morning. Rio got an added bump due to Citibank raising their recommendation on the miner to a ‘buy’.
What now for BHP and RIO?
Rio and BHP probably aren’t the stocks you’d hold for a short-term gain. While both impressively appreciated in 2016, they likely won’t run up more than 40% in 2017.
But there are resource stocks that could.
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Junior Analyst, Markets and Money
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