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Could China’s Slowdown Weigh on Iron Ore Prices This Year?

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Jan. 28 2019, Updated 2:25 p.m. ET

Iron ore’s roller-coaster ride

Iron ore prices were volatile last year, peaking at $79 per ton in February, plunging to $63 per ton in March, and taking off again soon after. When Chinese steel mill margins were pressured in November, iron ore prices slumped again, and now they’ve started climbing again as US-China (SPY) (FXI) trade optimism has stabilized steel prices.

While iron ore’s volatility is expected to continue, near-term fundamentals don’t seem to be very appreciative of the price increase. Whereas supply is plentiful, demand is being pressured by weakness in China and US-China (SPY) trade headwinds. For more on iron ore and steel price drivers, read Why China Needs More Than a Trade War Truce to Buck the Slowdown.

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Iron ore miners’ performance

Due to iron ore prices’ recent recovery, iron ore miner stocks have also gained this year. As of January 25, Vale (VALE), Rio Tinto (RIO), and BHP (BHP) had risen 3.6%, 7.8%, and 4.1%, respectively. Vale stock collapsed following a dam burst at one of its mines in Brazil on January 25. Before the accident, its stock was outperforming seaborne iron ore peers (XME), having risen 13% this year. Cleveland-Cliffs (CLF) has outperformed these miners, gaining 25% due to US (DIA) steel market dynamics, which have remained mostly strong.

Series overview

In this series, we’ll look at recent iron ore prices and their drivers. We’ll also discuss the Chinese economy’s influence on iron ore prices’ outlook. China, as the largest consumer of seaborne iron ore, plays a major role in iron ore’s fortunes. Next, we’ll discuss the effects of the Vale mine’s dam burst on iron ore prices.

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