Could China ‘steel’ the show for the iron ore price?

Iron ore extends its losses on Wedensday.

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Key points

  • Iron ore futures have extended losses overnight, now evaporating gains made in 2022
  • The selloff has been sparked by fears of lower demand from the world's largest steel producer, China
  • The downturn has spilled over to impact the ASX's big three iron ore players 

Iron ore prices have turned south for the ninth straight session amid fears of a slump in demand from top global steel producer China.

Iron ore now trades at US$117 per tonne after sliding around $30/tonne from previous highs on 8 June, erasing gains earned this year to date.

What’s up with the price of iron ore?

Lower steel output in China has, in turn, hit demand for iron ore.

Prices tumbled to levels “not seen since last December, as persistent coronavirus outbreaks in China and aggressive rate hikes impacting global growth raised concerns about demand,” Trading Economics reported.

Commonwealth Bank of Australia commodity strategist Vivek Dhar said the reversal in iron ore prices is evidence the market is “finally paying attention to current steel market signals in China,” as reported by The Australian.

Dhar added:

Markets are particularly worried that demand growth expectations linked to China’s pledge to boost infrastructure investment may not materialise.

At the same time, prices for other metals, such as aluminium, have slumped on “worries that aggressive interest rate hikes by…central banks could tip the global economy into a recession”, according to reporting by Reuters published on the US Nasdaq site.

What does this mean for Aussie iron ore miners?

The market rut for iron ore is set to hurt “Australia’s big three miners”, the report claimed.

Specifically, the big three refers to Rio Tinto Ltd (ASX: RIO), BHP Ltd (ASX: BHP), and Fortescue Metals Group Ltd (ASX: FMG).

The article said:

The three Australian mining behemoths, so far this month, have already lost roughly A$30 billion of their combined market value, and are facing a third straight week of losses after hitting multi-week lows on Monday.

Fortescue is trading near six-month lows whereas both Rio and BHP’s share prices have been similarly volatile during the same time period.

TradingView Chart

If the spiral continues, each of the three major iron ore players’ share prices could be impacted.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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