It's proving a tough day so far for ASX iron ore shares. This comes after a broker offered a bearish view on the iron ore price.
The S&P/ASX 200 Materials Index (ASX: XMJ) is currently the worst-performing sector index on Thursday, with a 3.04% loss.
Some of the largest ASX iron ore producers are also having a rough start to the day. Here's how they're holding up:
- Fortescue Metals Group Limited (ASX: FMG) down 3.37%
- BHP Group Ltd (ASX: BHP) down 2.91%
- Rio Tinto Limited (ASX: RIO) down 2.54%
Looking at the bigger picture, the S&P/ASX 200 Index (ASX: XJO) is struggling today and is currently descending 2.04%.
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Liberum gives a bearish outlook for iron ore
Liberum Capital gave a bleak short-term outlook for the iron ore price in a note published by The Australian Financial Review this morning.
The broker's bearish position on iron ore was influenced by what's been happening recently in Chinese markets. This could be bad news for ASX iron ore producers as China is collectively their largest export destination.
China's steel-intensive property sector was stated to be "subdued", and the steel industry could be heading into a weak trading period.
Other factors included reduced ore-buying rates and destocking by steel companies in China, as well as an increase in maintenance programs by local businesses. These factors come amid the margins for companies in the steel industry collapsing.
One reason to be bullish
However, amid the bad news, Liberum notes that while steel production and demand are weak in China right now, the industry typically reports a significant increase in activity after the winter season. This is expected to happen in the first quarter of 2023.
Liberum concluded by giving its analysis of the current iron ore price in China.
Flagship signal, 62 per cent Fe fine, North China (31-Oct; physical), is now $US82/t, -31 per cent YTD; half of Apr-22's peak; spot is now 9 per cent below our 4Q22 & 2023 average forecast of $US90/t; 26 per cent above our long-term nominal price of $US65/t cfr North China.
