Can Iron Ore Miners Pick up the Pace in 2H17 after a Dull First-Half?
Iron ore price progression
Iron ore prices have been on a roller-coaster ride so far in 2017. After reaching a peak of $95 per ton in February 2017, prices fell 40% to $57 per ton by June. After hitting this bottom, prices again rebounded to the current ~$65 per ton.
Most analysts are still bearish on the long-term price outlook for iron ore. They expect additional supplies, especially from Vale SA’s (VALE) S11D and Roy Hill mine in Australia, to create a surplus in the already well-supplied market.
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This event, in turn, would again put downward pressure on iron ore prices. The market participants are also not very positive about Chinese steel demand, given the government’s efforts to rein in leverage in the country.
Iron ore miners’ 1H17 performance
After having an unexpectedly good year in 2016, iron ore companies’ (XME) gains in 2017 remain muted. In 1H17, Vale (VALE) led miners with a gain of 14.8%, as compared to the gains of 10%, -0.5% and -17.7% for Rio Tinto (RIO), BHP Billiton (BHP), and Cliffs Natural Resources (CLF).
While weaker seaborne iron ore prices underpinned these muted gains for mining companies, there were other company-specific factors in play that determined huge divergences in share prices.
In this series, we’ll discuss the company-specific factors that shaped have mining stock prices in 1H17. We’ll also review stock performances in the first half of 2017 and see how the rest of the year looks. We’ll also explore the major developments that took place in the iron ore sector during the first half of the year.
In the next few parts, we’ll discuss individual miners’ performances and the reasons behind them. We’ll wrap up the series with a discussion about analyst rating changes and valuations.