Iron ore miners are getting crushed

Big falls in the spot price of iron ore overnight and the prospect of even larger falls today have seen Australia’s ASX-listed iron ore miners hammered.

In lunchtime trading, here’s how Australia’s iron ore stocks are travelling.

Company Share Price Market Cap ($m) Price change
Atlas Iron Limited (ASX: AGO) $0.01 $120.4 -13.3%
BC Iron Limited (ASX: BCI) $0.13 $51.0 -7.1%
Mineral Resources Limited (ASX: MIN) $9.38 $1,757.2 -3.5%
Grange Resources Limited (ASX: GRR) $0.16 $179.4 -3.1%
BHP Billiton Limited (ASX: BHP) $22.71 $114,250.6 -2.3%
Rio Tinto Limited (ASX: RIO) $57.35 $93,864.2 -1.7%
Fortescue Metals Group Limited (ASX: FMG) $4.89 $15,226.5 -1.6%

Source: Google Finance

Iron ore fell 5.1% to US$65.20 a tonne overnight, but futures are lower again and point to falls of nearly 7% for the spot metal.

As usual, the smaller iron ore miners, with their higher costs and lower profit margins, are getting hit the hardest.

There could be more pain to come, with iron ore prices likely to sink even further, since hitting a high of US$94.86 a tonne in February 2017. It seems an oversupply of the metal, which is expected to get even worse is the main culprit for sinking prices.

According to the China Iron & Steel Association, oversupply isn’t easing as steel output falls and port stockpiles remain at elevated levels. Steel prices have also been falling.

But Rio Tinto’s boss Jean-Sebastien Jacques told reporters recently that he isn’t all that worried about China and the demand for iron ore over 2017 and says 2018 is looking positive.

Australia’s iron ore miners generally produce much higher quality iron ore, which the steel mills like, so demand for our ore should continue.

Foolish takeaway

Predicting the direction of commodity prices is a tough game and one I’d prefer to avoid. As a result, I’m not tempted by the recent falls in the share prices of the miners.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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