Iron Ore Price Collapsing: World's Top Iron Ore Miners' Stock Declining Dramatically

Written by Frik Els

The price of 62% Fe content ore – the steelmaking raw material – plunged 5% on Tuesday to a six-month low of $61.50 per dry metric tonne according to data supplied by The Steel Index and is now down by more than 33% over just the last month with a consensus view that iron ore prices have got a lot further to fall.

The knock-on effect on the market value of the world’s top iron ore miners have been dramatic [as a result].

The world number four, Australia’s Fortescue Metals Group (PINK: FSUMF), a pure play iron ore producer, has been hardest hit. FMG stock has lost more than 23% of its value over the last month and the Perth-based firm is now worth US$15.6 billion on the ASX following a 7.5% drop in Tuesday trading.

World number one Companhia Vale do Rio Doce SA (NYSE: VALE) is down 16.1% over the same period knocking $8.5 billion off the Rio de Janeiro-based company’s market capitalization.

Diversified giants Rio Tinto PLC (NYSE: RIO) and BHP Billiton Ltd. (NYSE: BHP) between them have given up $19 billion since the iron ore price peak mid-March.

Despite Chinese figures, released on Monday, showing an economy growing at a faster than expected pace of 6.9% in March…and the country’s blast furnaces pumping out steel at a record pace of 72m tonnes in March to feed its red hot housing and construction sector…stockpiles at Chinese ports continue to build and additional mine supply – including from domestic Chinese miners – comes on stream.

There are no shortage of iron ore bears:

According to Ben Davis, an analysts at Liberum, a London-based investment bank…

“A crackdown on cheap credit and mortgage lending could put a lid on house price rises, with a knock-on impact on construction. That swing in demand growth is hugely damaging. Iron ore prices have got a lot further to fall. They’re easily going to the $40s.”