It could be a difficult day for BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: RIO) shares on Tuesday.
This follows another pullback in the iron ore price during overnight trade.
What's happening?
Unfortunately for these mining giants, the iron ore price came crashing down to Earth during overnight trade.
According to Metal Bulletin, the catalyst for this weakness was Chinese authorities taking a stricter stance against steelmakers on steel production curbs and the start of sintering restrictions.
This ultimately led to the benchmark iron ore price falling a disappointing US$13.55 a tonne or 9.3% to US$131.50 a tonne.
It was a similar story for lower grade 58% fines iron ore, which fell 9% or US$9.84 a tonne to US$104.70 a tonne.
What now for BHP, Fortescue, and Rio Tinto shares?
Where BHP, Fortescue, and Rio Tinto shares go next will depend largely on what happens with the iron ore price.
Given how much iron ore contributes to their sales, higher prices have boosted their profits and underpinned generous dividend payments.
If there isn't a rebound in the steel making ingredient in the near term, it could lead to revisions to earnings estimates for the miner.
For example, Goldman Sachs is currently forecasting an average iron ore price of US$178 a tonne in FY 2022 and then US$140 a tonne in FY 2023. If prices don't improve soon, it seems unlikely that they will average those levels during the coming financial years.
This could mean that these miners won't be in a position to deliver on the broker's forecasts, potentially putting their shares under pressure.
Though, as we have seen in the past, the iron ore price has a habit of surprising to the upside. So don't count it out just yet.
