Iron ore prices
Since the end of July, benchmark iron ore prices have held steady near $55–$56 per ton. There are certain short-term factors that impact iron ore prices favorably. One is bringing forward iron ore demand as some steel mills will remain closed in September due to the World Athletics Championship, held in Beijing from August 22–30, as well as the September 3 World War II anniversary parade.
Secondly, the massive explosion on August 12 in the port city of Tianjin caused some supply disruptions, supporting iron ore prices. Tianjin is a major port in China, which handled ~25 million tons of iron ore in 1H15. This is close to 5.5% of the total Chinese iron ore imports. However, starting on August 14, most of the operations have resumed at the port. We’ll discuss this in more detail later in this series.
In this series, we’ll see how recent data releases from China have impacted 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 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.
In the next part of this series, we’ll see how China’s recent devaluation of the yuan could impact iron ore prices and miners.