Iron ore prices
In our previous update on the iron ore industry, we discussed how the data coming out of China is negatively impacting iron ore miners’ prospects. Iron ore miners are already suffering. Iron ore prices declined 55% since 2014. In 2015, iron ore prices have been on a roller coaster ride. They declined 33% from $70 per ton at the end of 2014 to $47.10 per ton in early April. The prices rebounded 33% to $63.10 per ton as of May 29, 2015.
The above chart shows the trend in iron ore prices. Iron ore prices were more or less steady in May.
About this series
In this series, we’ll discuss how the recent data releases on the supply side, including iron ore exports from Australia and Brazil, are shaping up in May. The data releases were impacted by the weather in April. We’ll also look at demand indicators from China—like steel production in China and its factory activity in May. The data impact iron ore prices as well as iron ore companies’ revenue, margins, and stock prices. These companies include BHP Billiton (BHP) (BLT), Rio Tinto (RIO), Vale (VALE), and Cliffs Natural Resources (CLF). Cliffs Natural Resources forms 3.6% of the SPDR S&P Metals and Mining ETF (XME).
This will help investors understand the direction that iron ore prices will be taking.
Performance of iron ore stocks
Among iron ore stocks, only Rio Tinto and BHP Billiton increased or stayed flat. YTD, (year-to-date), BHP Billiton increased by 5.7%, while Rio Tinto remained flat. All of the other stocks are highly leveraged to iron ore prices—being pure-plays or less diversified. Vale SA has lost 15.3% YTD. Cliffs Natural Resources has lost 22.2% and Fortescue Metals Group (FSUGY) has fallen by 15.9%.
In the next part of this series, we’ll discuss how weak iron ore prices are impacting capacity progression among iron ore players, including US integrated steel companies.