Key Variables: Why Pressure on Iron Ore Prices Could Persist



Iron ore prices

Iron ore prices have corrected from mid-June levels and are currently trading at $61 per ton. This is 6.2% lower from mid-June’s levels.

As we’ll see later in this series, steel prices in China—which consumes two-thirds of the world’s seaborne iron ore—have remained weak and have, in fact, touched fresh 12-year lows. This is one of the factors that is limiting iron ore prices’ upward movement. This could also lead to a significant downside to iron ore prices going forward. The supply side also remains strong, with some of the capacity slated to come online later this year and in 2016.

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Series summary

In this series, we’ll see how recent data releases from China impact iron ore prices. We’ll also look at iron ore companies’ revenues, margins, and stock prices. These companies include BHP Billiton (BHP) (BLT), Rio Tinto (RIO), Vale SA (VALE), and Cliffs Natural Resources (CLF).

The iShares MSCI Global Metals & Mining Producers ETF (PICK) invests in iron ore. BHP Billiton is PICK’s top holding, making up 16.7% of the fund. The SPDR S&P Metals & Mining ETF (XME) also invests in the metals and mining space.

We’ll also look at a few indicators that relate to China’s demand for iron ore. These include China’s PMI, iron ore imports, and steel production. This series also includes discussions on construction trends in the United States. This will help investors understand the direction that iron ore prices could take in the future.

Most of these indicators are published monthly, and other indicators are reported weekly or quarterly. Regardless, investors should look at these indicators collectively, as they give important clues about the direction of iron ore prices.


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