Major miners fall as iron ore prices continue to sink

Waning Chinese demand and oversupply concerns push iron ore prices lower.   

| More on:

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

Plunging iron ore prices continue to weigh on the ASX's major miners.

BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and Fortescue Ltd (ASX: FMG) have all seen their prices edge lower on Thursday.

The price of iron ore has dropped below US$93 on the Singapore Exchange, marking a 9-month low.

And analysts are expecting further declines.

Citigroup and Goldman Sachs have cut their iron ore price forecasts.

Goldman Sachs previously stated that it expects iron ore spot prices to average at around US$85 per tonne in the final quarter of this calendar year.   

Citigroup has now lowered its three-month price forecast to $90 a tonne from $100, and the six-to-twelve-month target was cut to $85 from $90.

In a note, Citigroup analysts stated:

Steel demand in China is likely to remain weak over the coming months over the upcoming seasonal lull.

China is by far the world's largest importer of iron ore, accounting for about 70% of global trade.

Female miner standing next to a haul truck in a large mining operation.

Image source: Getty Images

Supply and demand

The ongoing tariff turmoil has certainly not increased China's demand for iron ore as the country cuts back steel production.

And, as China's demand for iron ore diminishes, supply continues to increase.

Rio Tinto this month announced it had opened a new mine in Western Australia with the capacity to produce up to 25 million tonnes of iron ore per year.

Adding to oversupply concerns, Rio Tinto's massive Simandou iron ore project in Guinea is expected to begin shipments later this year.

Simandou is said to contain high-grade iron ore, estimated at around 1.5 billion tonnes, and is one of Africa's largest mining projects.

As such, downward pressure on the price of iron ore looks set to continue.

Bottom line

For years, shareholders have enjoyed solid returns from Australia's iron ore miners, particularly BHP, Rio Tinto, and Fortescue.

Iron ore, Australia's largest export, has also been a crucial ingredient fuelling the country's prosperity.

As such, it's not only the country's iron ore miners and their shareholders that will feel the impact of falling iron ore prices.

Still, the major miners are likely to take a hit as the value of the commodity sinks.

UBS is projecting that BHP's revenue could drop more than US$2 billion to US$7.6 billion in FY26.

Australia's Department of Industry, Science, and Resources is not expecting things to turn around anytime soon for the country's iron ore miners.

The Department's latest Resources and Energy Quarterly report forecasts Australia's iron ore export earnings to fall from around $117 billion in FY25 to about $109 billion in FY26.

Further declines could see export earnings drop to $81 billion in FY30, representing a decline of more than 30% from the FY25 figure.

Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Two miners laughing and having fun while using smart phone during their coffee break.
Resources Shares

Tivan gets green light for maiden drilling at Sandover Fluorite Project

Tivan secures final approvals for maiden drilling at Sandover Fluorite Project, targeting high-grade manganese and fluorite zones.

Read more »

Senior man looking at his laptop and pondering something.
Resources Shares

Should I invest $10,000 into Fortescue shares?

The latest earnings forecasts make me cautious about the mining giant.

Read more »

Two excited mining workers in yellow high vis vests and hardhats shake hands to congratulate each other on a mineral discovery
Resources Shares

BHP share price hits new record high

BHP shares have now beaten all 12-month price targets set by experts since its FY26 report.

Read more »

Woman looking at her computer and pondering something.
Resources Shares

Are Rio Tinto shares a good buy and hold pick?

I think several major projects could reshape Rio Tinto over the coming years.

Read more »

Two miners laughing and having fun while using smart phone during their coffee break.
Resources Shares

$6,000 invested in BHP shares 12 months ago is now worth….

BHP shares have hit a fresh all-time high today.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

FireFly Metals reveals robust Green Bay PEA and resource boost

FireFly Metals released strong Green Bay project economics and a resource upgrade, with early works and growth plans well underway.

Read more »

Two miners examine things they have taken out the ground.
Resources Shares

Southern Cross Gold reports drilling results

Southern Cross Gold releases high-grade gold-antimony drill results at Sunday Creek, expanding the project’s size and strategic significance.

Read more »

Calculator and gold bars on Australian dollars, symbolising dividends.
Resources Shares

Westgold Resources launches $100m Meekatharra expansion plan to boost output

Westgold Resources announced plans to upgrade its Meekatharra processing hub, aiming to lift output and improve cash generation from FY28.

Read more »