Iron ore miners urge investors to remain confident

Do the recent falls present as a buying opportunity?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mining groups are urging investors to look beyond the sector’s short-term glut and instead focus on its medium-to-long-term prospects, suggesting that the price tag on iron ore will soon recover.

Atlas Iron Limited (ASX: AGO) has joined the likes of BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) in trying to calm the market down after its recent jitters, which has seen iron ore – a key steelmaking ingredient and Australia’s most major export commodity – plunge more than 16% in the last three weeks, including an incredible 8% fall on Tuesday.

Speaking to The Australian Financial Review, Atlas Iron’s managing director Ken Brinsden said: “There is a lot of day-to-day noise and headlines about China’s demise or extraordinary growth… It fluctuates between two pretty amazing extremes. If you are prepared to look through the middle ground, it is still pretty healthy for natural resources.”

Despite the recent falls, each of the miners will continue to ramp up their production levels as they anticipate demand for the commodity to remain strong for years to come. BHP and Rio Tinto, for instance, believe Chinese demand for steel will be over 1 billion tonnes by 2025 or 2030. They will also focus on reducing costs and unnecessary spending whilst also improving productivity which will boost margins.

It should also be noted that each of the miners are still making a healthy profit even at today’s price of US$104.90. Rio Tinto, Australia’s lowest cost iron ore producer, is estimated to have a break-even price of US$43 a tonne according to UBS estimates, while Australia’s third-largest miner, Fortescue Metals Group Limited’s (ASX: FMG), is up around US$70 a tonne.

Foolish takeaway

Although shares in the miners have dropped considerably in recent weeks, it is still not a good time for you to buy shares in the industry. The volatility is too high and any further drops in the commodity’s price could see the market punish the shares even more.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »