Iron ore price smashed: miners to follow

The iron ore price was crushed overnight, falling 6.7% (US$3.67) to US$51.22 a tonne, as port inventories of the commodity zoomed above 100 million tonnes.

Australia’s ASX-listed iron ore miners could be hit hard today, particularly the smaller and medium producers – who tend to have higher production costs and are therefore much more susceptible to dramatic price movements.

Those who could be hit include Atlas Iron Limited (ASX: AGO), BC Iron Limited (ASX: BCI), Fortescue Metals Group Limited (ASX: FMG), Gindalbie Metals Ltd (ASX: GBG), Grange Resources Limited (ASX: GRR), Mineral Resources Limited (ASX: MIN), as well as the two largest ASX miners Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP).

BHP reported last year that a US$1 decline in the iron ore price would impact its 2015 financial year profit after tax by US$144 million. In other words, BHP has lost roughly US$528 million in after tax profit overnight.

The commodity has now lost 27% of its value since peaking above US$70 a tonne on April 21 as stockpiles have soared, and as Chinese authorities clamped down on speculative trading in futures on several exchanges.

iron ore price May 2016

Source: Metal Bulletin


But port inventories are expected to continue increasing, piling further downward pressure on the spot iron ore price, as we wrote yesterday.

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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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