MENU

Iron ore exports tipped to rise

Australia is the world’s biggest exporter of iron ore and it also has the title of the country’s most lucrative product. In the past year, the Australian iron ore market has grown more than 16% in value, but is it worth the risk if the prices are set to keep falling?

Mining executives believe that ramping up production will help them remain competitive and take advantage of the next upturn in prices. However with job cuts, project cancellations and increasing costs, many share prices look like they’re headed downwards.

Yesterday, after Glencore Xstrata announced an axing of around 50 jobs at its Ravensworth mine in New South Wales, US giant Peabody Energy (NYSE: BTU) said it also plans to cut up 450 jobs. It seems that some are willing to weather the storm while others aren’t.

According to the Bureau of Resources and Energy Economics (BREE), both coal and iron ore prices can be expected to fall in the next year with the latter expected to become steady at around US$117 in 2014. This comes on the back of overnight falls of 2.2% to a low of US$114.

Despite falling prices, the increases in iron ore output are the result of expanding projects by some of our biggest companies including Rio Tinto (ASX: RIO), BHP (ASX: BHP) and Fortescue (ASX: FMG). However, some of our smaller ‘pure play’ iron ore miners like Atlas Iron (ASX: AGO) and Gindalbie Metals (ASX: GBG) are also expected to increase their output in coming years.

The one upside for our resource companies is the falling Australian dollar and BREE believes the difference between 103 and 94 US cents represents approximately $6 billion.

Foolish takeaway

It’ll be a rocky road ahead for most of our miners with prices falling, supply increasing and projects being sold off. It would be wise to wait until the next annual report before making any assumptions on their medium to long term prospects. With the banks and our biggest telco dropping in price substantially and paying much healthier dividends, perhaps your money could be better spent elsewhere.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!