A freight train carrying iron ore from mine to port along a rail track in Australia.
Ian Waldie/Bloomberg
Mining stocks came under renewed pressure on Friday, as iron-ore prices continued to slump amid China’s push to restrict steel production.
China has pledged to limit steel output as it looks to reduce carbon emissions. That has hurt demand for steel’s key ingredient— iron ore.
Beijing’s campaign seems to be working—crude steel production fell for a third consecutive month in August, data published Wednesday revealed. The data have given fresh impetus to iron ore’s slide in recent days, and spot prices, which were as high as $220 a ton in July, have now fallen to below $120. The benchmark price hit a record high of $233 a ton in May.
Anglo American (ticker: AAL.London) led the fallers on the U.K.’s FTSE 100 on Friday morning, slipping more than 4%, while Anglo-Australian miners BHP (BHP.London) and Rio Tinto (RIO.London) fell 2.8% and 2.2%. On the FTSE 250, the BlackRock World Mining Trust (BRWM)—an investment trust dedicated to mining and metal assets—declined 2.6%. Brazilian miner Vale
‘s U.S.-listed shares (VALE) were 1.2% lower in premarket trading.
UBS analysts predicted the iron price slide to continue, in a note on Friday, cutting its forecast by 10%, expecting the price to fall below $100 a ton by the end of 2021 and to average $89 in 2022. However, they argued the cut to China’s production was driven by the country’s weak property market.
Read: Iron-Ore Prices May Have Peaked. Sell Rio Tinto Stock, UBS Says.
The Swiss bank’s analysts, led by Myles Allsop, downgraded Anglo American from Neutral to Sell on Friday. “Since early July, the stock is up 7%, while the iron-ore price is down around 45% and the platinum group metals (PGM) basket price is down around 20%,” they said, noting that those commodities generated 76% of the company’s Ebitda in the first half of 2021.
They also downgraded Vale to Sell from Buy, noting that the Brazilian miner and Rio Tinto were the most affected, as they wouldn’t benefit from higher met-coal prices, which have surged in China.
Write to Callum Keown at [email protected]
